Artificial intelligence (AI) stocks have been lighting up the market like fireworks. While Super Micro Computer has surged by a stunning 161%, Arm catapulted nearly 50% post its earnings report, leaving investors scrambling for the next AI champion. However, smaller fish in this pond present enticing opportunities. Case in point: Perion Network (NASDAQ: PERI), which witnessed a 20% tumble post its fourth-quarter earnings report due to weaker revenue growth guidance in 2024.
However, seasoned investors might perceive this as a potential buying opportunity. The company’s strategic foray into AI is poised to yield substantial returns in the years ahead.
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Perion’s AI Innovations
Perion is primarily known for its intelligent hub, linking ad sellers and buyers, and optimizing purchases and placements using machine-learning algorithms. Yet, the company’s strides in generative AI could offer even more potential. A few months ago, it unveiled WAVE, an AI-driven audio advertising program that customizes, narrates, and tailors ads according to various parameters such as time, location, target audience, and weather conditions.
This approach brings cost-efficiency at scale compared to using human voice actors and astonishingly, Perion’s data suggests it outperforms traditional ads, producing a visit-rate lift of 2.4 times and an incremental sales lift of 117%. WAVE has already been embraced by major retailers like Albertson’s and Pep Boys, and is available on leading audio platforms like Spotify, SiriusXM Radio, and iHeartRadio. Furthermore, the company’s retail media revenue surged 196% in the fourth quarter to $20.2 million, reflecting the success of this strategy.
Another recent innovation is a program that displays ads on linear and streaming TV when viewers pause the program they’re watching, a concept currently operational in partnership with DirecTV. Finally, Perion sealed a $100 million deal to acquire Hivestack, a full-stack programmatic, digital-out-of-home (DOOH) ad company, expanding its presence in a rapidly growing ad channel where it was previously underrepresented.
Exploring the Potential for Growth
Several factors may propel Perion to new heights in the near future. With the AI market on the rise, the company’s emphasis on AI through investments in WAVE and SORT, its cookieless tracking technology, positions it to capitalize on the surge in AI. Furthermore, the recovery in digital advertising and anticipated spending by brands introduces additional potential for growth. Perion also aims to foster growth through strategic acquisitions designed to augment the business and solidify its standing as an all-in-one adtech destination.
Notably, the stock appears significantly undervalued, trading at a price-to-earnings ratio of less than 11, presenting a substantial discount compared to its peers, despite a track record of robust growth. Although buying back shares at this valuation seems logical, Perion CEO Tal Jacobson emphasized that the company’s focus lies in reinvesting in the business to drive long-term shareholder returns.
Anticipate further product and feature releases from Perion in the current year, accompanied perhaps by another acquisition. Potential outperformance of the company’s guidance may incite a surge in the stock price as investors rekindle their enthusiasm for its growth narrative.
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Jeremy Bowman holds positions in Perion Network. The Motley Fool also has positions in and recommends Spotify Technology, and recommends Super Micro Computer. The Motley Fool abides by a disclosure policy.
The views and opinions expressed herein solely belong to the author and do not necessarily reflect those of Nasdaq, Inc.
