Cantor's Top SaaS Stocks for AI Growth
Source: finance.yahoo.com
AI-Driven SaaS Stocks: Cantor's Top Picks
Artificial intelligence software as a service (AI SaaS) is taking shape, utilizing cloud technology to deliver AI tools while minimizing costs for end users. The cloud can reach customers who need high-end computing but can’t support the infrastructure themselves. Adding AI will put machine learning and natural language processing into the cloud’s toolbox. From a user perspective, subscription-based SaaS models will give flexibility and scalability.
The AI SaaS market was estimated to be worth $115.22 billion and is predicted to reach $2.97 trillion by 2034. Cantor analyst Matthew VanVliet sees major upside in this space and in the stocks poised to benefit. VanVliet believes AI represents a greater catalyst than pandemic-era work-from-anywhere investments and sees opportunity for growth to re-accelerate, unlocking multiple expansion.
VanVliet has singled out two top picks. According to the TipRanks database, both stocks carry Strong Buy consensus ratings.
Klaviyo, Inc. (KVYO)
Klaviyo is a software firm that brings CRM to the B2C world, fielding a data platform with AI insights for marketing automation, data analysis, and customer service. Klaviyo’s customers can use the company’s software packages to improve their own customers’ interactions, like customer profiles and omnichannel campaigns. The company’s email and SMS marketing services use AI tech to smooth out customization and targeting and to automate content generation and optimize send times.
Klaviyo had over 169,000 customers as of this past March 31. The number of large customers, those generating more than $50,000 in annual recurring revenue (ARR), came to 3,030, up 40% year-over-year. Klaviyo’s 1Q25 financial release also showed quarterly revenue of $279.8 million, up 33% year-over-year and $11.89 million ahead of forecasts. The company ran a net loss in the quarter, of 5 cents per share, but that was one cent per share better than had been anticipated.
VanVliet is upbeat on Klaviyo, citing the company’s position and its large total addressable markets and potential for growth. KVYO’s core ecommerce/retail SAM is ~$16b, with potential to expand. At $1b+ of revenue today, KVYO’s penetration remains low. VanVliet’s $48 price target implies a potential gain of 41% for the shares in the year ahead.
The Strong Buy consensus rating on KVYO shares is based on 18 recent Wall Street recommendations, which break down to 15 Buys and 3 Holds. The stock’s $33.95 current trading price and $43.41 average target together suggest a one-year upside of 28%.
HubSpot, Inc. (HUBS)
HubSpot is a marketing software platform with a stable of marketing software packages offered through a unified platform. HubSpot’s software solves problems in CRM, content management, social media management, and SEO. HubSpot introduced its Breeze AI toolkit as an AI enhancement of the company’s existing services, with the Breeze Customer Agent billed as a ‘24/7 AI concierge.’
HubSpot claims that client teams using the AI agent see a 10% higher close rate on work orders, a 39% faster ticket resolution, and upwards of 50% of customer contact conversations resolved automatically, with the top users reaching 90%. The company’s Breeze Content Agent can scale content marketing efforts, create and publish landing pages, and generate search-optimized blog posts.
In its 1Q25 financial report, HubSpot’s customer count as of March 31 was up 19% year-over-year. HubSpot reported $714.1 million in revenue, up 16% year-over-year and $13.7 million ahead of estimates. In Q1, it realized a non-GAAP EPS of $1.84 – 8 cents better than expected. The company finished Q1 with $2.2 billion in cash and liquid assets on hand.
VanVliet is impressed by HubSpot’s record of success. The analyst says HUBS has successfully moved into adjacent sub-categories. He notes that HUBS is gaining traction upmarket, which is key to sustaining mid-to-high teens growth over the medium term. Looking at HubSpot’s use of AI, the Cantor analyst remains upbeat, adding that HUBS’ organically built platform is well-positioned to leverage AI and strengthen its competitive edge. VanVliet rates HUBS stock as Overweight (i.e., Buy). His price target, set at $775, indicates room for an upside potential of 28.5% on the one-year horizon.
HubSpot has picked up 28 recent analyst recommendations, which include 24 to Buy against just 4 to Hold, for a Strong Buy consensus rating. The stock is selling for $602.61, and its $749.32 average price target implies a potential one-year gain of 24%.