Our Best AI Stock to Buy Will Double Its Revenue by 2020

You may not have heard of it, but "augmented analytics" is going to be one of the best sectors for investing in 2019 and beyond.

This is a revolutionary application of artificial intelligence (AI), and its market is expected to grow from its current $4.6 billion to $18.4 billion by 2023.

That's 300% growth, for an entire industry, in just four years. That's making AI stocks some of the hottest investments on the market right now.

This industry growth will come from both well-known, cash-rich firms, as well as smaller niche players.

To help you cash in on this explosive sector, we uncovered three companies poised to control the market. They've already invested heavily in making complex data useful to enterprises.

Before we get to the three best AI stocks to buy in 2019, here's why this technology is so revolutionary - and why you can't afford to stay away...

Why Augmented Analytics Is the Hottest Sector in Tech

Yearly revenue for business data and analytics worldwide has grown from $122 billion in 2015 to $186 billion this year. It's expected to grow to $260 billion in 2022, a 40% leap in less than three years.

This doesn't look to be slowing down, either.

In a 2014 study by Accenture, 79% of executives agreed that companies failing to harness Big Data will die out. Eighty-three percent of the same pool were reported to have invested in Big Data projects to stay competitive.

This is starting to ring true. Businesses currently have such an overwhelming amount of data on their customers and operations that they've struggled to make it useful. They are beginning to seek AI and machine learning (ML) solutions to help sort through their massive stockpiles of data.

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Different AI and ML engines can automate the process of sifting through data and presenting it to users in an intuitive, actionable format. That means taking piles of raw data and converting it into easily digestible graphs, charts, or other visualizations.

This obviously makes an employee's life easier, which makes the business more lucrative. They have faster access to data that helps them make informed decisions. So when employees have the right level of access to the right data, it raises the company's overall productivity.

In this case, businesses want AI-driven analytics tools - or augmented analytics - made accessible to everyone. Some larger companies already got a head start on this trend, but businesses far and wide will be adopting it over the next few years.

Most organizations currently use combinations of open-source AI and ML technologies to support their needs. But Gartner, the leading global research and advisory firm, predicts 75% of AI- and ML-driven business solutions will be provided by commercial vendors by 2022.

That's where this is turning into an opportunity for investors like you.

Gartner predicts this growth in AI stocks (and the 673% earnings growth of one of our top AI stock picks) will be driven by new commercial demand for augmented analytics...

Why We're Calling This the Commercial AI Boom

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Gartner recently published its annual list of the most disruptive data and analytics technology trends, and augmented analytics came out on top.

Gartner has nailed these predictions before, like when blockchain technology took the top spot in 2016. Bitcoin value surged almost 2,000% less than a year later, affirming the need for the digital ledger technology.

On the list this year, augmented analytics beat out blockchain and a host of other AI, ML, and analytics functions like explainable AI and augmented data management.

Augmented analytics will top all business applications of AI because it fundamentally changes the way data is used across an enterprise - it makes it more useful to more people. Gartner sees this being a main factor behind purchases of business intelligence platforms, and it should set apart companies adopting the most affordable, effective options.

Now that you know a little about the market, here are our picks for the top three augmented analytics firms. Some of these companies will be familiar to you; some will not. They can play different roles in your portfolio, but you can expect them all to turn profits going into 2020.

We've lined them up from one solid defensive play to a young, speculative small-cap stock with the potential to explode. Here's our first pick...

Best AI Stocks to Buy, No. 1: Microsoft Corp.

With its diverse portfolio and competitive moats, Microsoft Corp. (NASDAQ: MSFT) will remain a leader in the business intelligence market far into the future. It gets to build on decades of trust providing enterprise tools like Outlook, SharePoint, and Excel.

And now, MSFT can run data from all those applications through the Power BI platform.

Power BI is Microsoft's interactive data visualization tool providing the "augmented analytics" capability we're talking about. It pulls from data sources like Excel, Salesforce, Google Analytics, social networks, and IoT devices, and presents it in an interactive visual environment for the user. This service will provide invaluable sales, marketing, financial, and operational insights to businesses around the world. This platform is hard to beat.

Power BI serves 9,885 companies ranging in size from 10 to more than 10,000 employees. These clients include big names like Metro Bank Plc. and Jones Lang Lasalle Inc. The platform is supported by Microsoft's powerful Azure cloud database, which has centers in over 100 countries. Though it can be installed on premise or in the cloud, cloud-based services are ever increasing in popularity for their scalability.

Revenue from Microsoft's commercial cloud services altogether was more than $23 billion for 2018, beating its goal of $20 billion. This year, the annual run rate is projected over $30 billion. This will dovetail with the further distribution of Power BI installations as more and more businesses move their data to the cloud.

Microsoft management has done well pushing its products under the leadership of CEO Satya Nadella. The company raked in a total $110.4 billion in revenue by the end of 2018, and analysts expect them to earn over $141 billion for 2020.

The MSFT stock delivers $4.31 in earnings per share and a 1.65% dividend yield. Its price/earnings ratio is at 25.63, less than half that of the software and computer industries (55 and 57, respectively), and about a quarter of the computer services industry (119). This means the stock price has great potential to rise.

Along the same lines, MSFT scores a 3.75 on the Money Morning Stock VQScore™ system, making it a good buy right now, but an even better one on dips. Plus, 27 of 34 analysts recommend buying the stock.

As the price could potentially skyrocket, MSFT has a spot in everyone's portfolio by year's end.

And so does our next stock pick - the company is expected to double its revenue in 2020...

Best AI Stocks to Buy, No. 2: Tableau Software Inc.

Seattle-based Tableau Software Inc. (NASDAQ: DATA) wants to be known for how it manages data. Just look at its ticker. This is another analytics provider with the luxury of history and name recognition. The DATA stock has been around since 2013 and has steadily doubled its share price since. But the thing to consider is that it has not even had its heyday yet.

Companies today typically use 20 different solutions to manage data and performance analytics, but Tableau wants to be the all-in-one platform. It currently has a strong, growing international customer base that includes names like Princeton University, Unilever (NYSE: UN) and Ericsson (NASDQ: ERIC). Some 32, 567 companies are served by Tableau in one form or another.

Tableau currently offers some of the fastest data extraction on the market through "Hyper," its newest data engine. DATA stresses performance and ease of use with this system, boasting the ability to create visualizations using drag-and-drop functions after analyzing billions of data fields in seconds. This will catch fire because it tackles everything enterprises are looking for in their analytics systems - most importantly, more people in an organization can access it.

A common issue Tableau tries to solve is the lag between the data and people using it. Typically, a data analytics engine might slow down what's called the "write speed" - the speed at which information can be written to a disk - to keep the analytics workload stable. CEO Adam Selipsky says this data could often be outdated by the time an end user wants to act on it. With faster write speeds, Hyper promises fresher data than any other analytics tool, thus better-informed decisions by end users.

The DATA stock currently sells for $125.74, but analysts give it a high price target of $162. Tableau's revenue for Q4 2018 was $840.9 million, a 41% change year over year. In 2019, it expects to turn a profit for the first time in a few years.

Sales growth is projected to increase 39%, from $982.95 million to $1.37 billion. Analysts predict the company will nearly double its revenue by 2020, earning up to $1.82 billion, up from $982 million last year.

Tableau software is a slightly more speculative stock than Microsoft, but the company is far more specialized in the data world than any of its competitors.

Even in a hypothetical future where every business intelligence solution gets swept under the same Microsoft umbrella, Tableau's tech and know-how are too indispensable for it to not at least become an acquisition target.

Because the market for data analytics looks so optimistic, investors should be optimistic about Tableau stock. But there's one more contender for anyone still convinced about a 2020 business intelligence boom...

Best AI Stocks to Buy, No. 3: Domo Inc.

Domo Inc. (NASDAQ: DOMO) is a young rising star in the data analytics world. It only has 116 clients, but they're big clients. Executives from companies like Target (NYSE: TGT), Southwest Airlines (NYSE: LUV), Sephora, and National Geographic have been using Domo's software to gather real-time, top-down information about their businesses conveniently from their phones.

CEO Josh James attributes their 95% retention rate to an unparalleled user experience. The Domo system was all developed in-house as the company focused on putting together an original product that couldn't be mimicked elsewhere.

Now, the unique cloud-based platform allows end users to drill down from global, to national, to local operations - even down to individual retail items - and get a snapshot of their performance.

The system was hailed for its flexibility and scalability, and how it increased confidence in executive decisions. Gartner analysts write that one thing separating Domo from the competition is its ease of use and deployment "requiring little or no support from IT."

Domo was founded in 2010 and only went public in summer 2018. Now the company's investing heavily in research and development for the long term.

The stock price has gone up 13% over the last year. It currently sells at $31.14, with a high target of $38 for the 2019. Five of six analysts recommend buying.

This might be the most speculative of our three stocks, but if Domo manages to stay true to its pursuit of disruption, it will pay off big once augmented analytics really start to catch on.

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About the Author

Mike Stenger, Associate Editor for Money Morning at Money Map Press, graduated from the Perdue School of Business at Salisbury University. He has combined his degree in Economics with an interest in emerging technologies by finding where tech and finance overlap. Today, he studies the cybersecurity sector, AI, streaming, and the Cloud.

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