Eight Capital Eight Capital analysts Adhir Kadve and Christian Sgro believe Enerprise Software companies have yet to benefit from the “arms race” in the technology sector to adapt to the use of Generative articial intelligence, however they “see early evidence of momentum building.”
“In our view, the adoption and implementation of Generative AI solutions will be a secular growth theme within Enterprise Software and one which will dominate the technology narrative for the foreseeable future,” they said. “As technology companies harness the technology to bolster their offerings and accelerate growth, profitability and value creation, there will be a re-rate opportunity for well-positioned companies from 18-month valuation lows.”
In a research report released Tuesday titled Generative AI: Outlook and Opportunity, the analysts predicted generative AI could “outpace” previous technology cycles and will prove a “significant tailwind” for enterprise software companies with offerings in development or the market.
“We see a select group of companies within our coverage that will benefit from Generative AI, given significant increases in expected spending to adopt the technology, including Canadian bellwethers; OpenText, and Kinaxis,” they said. “Within that list, we see Docebo, WELL Health, and Coveo as outsized beneficiaries, given products in market and early evidence of product market fit.”
In all, the analysts recommended 13 companies for investors to gain exposure to the trend. They are:
* Open Text Corp. with a “buy” rating and US$50 target. The average target on the Street is US$48.30.
Analysts: “Open Text has a broad suite of AI offerings including key products Magellan and Vertica (which was acquired via the Micro Focus acquisition). Recall that Open Text is a leader in Enterprise Information Management and as such the company leverages the significant data and information stored within an organization to unlock potential insights within that data by leveraging Large Language Models. The company recently showcased a Titanium X integration leveraging Google’s T5 open source model as well as OpenAI’s GPT.”
* Kinaxis Inc. with a “buy” rating and $230 target. Average: $222.46.
Analysts: “Open Text has a broad suite of AI offerings including key products Magellan and Vertica (which was acquired via the Micro Focus acquisition). Recall that Open Text is a leader in Enterprise Information Management and as such the company leverages the significant data and information stored within an organization to unlock potential insights within that data by leveraging Large Language Models. The company recently showcased a Titanium X integration leveraging Google’s T5 open source model as well as OpenAI’s GPT.”
* Altus Group Ltd. with a “buy” rating and $65 target. Average: $62.67.
Analysts: “Altus’ machine learning algorithms bring together disparate and unstructured inputs across the world of Commercial Real Estate (CRE) to provide property intelligence. Currently, there are no universal identifiers for real estate, such as a CUSIP for equities. Altus identifies properties, associates attributes within proprietary models that are actively maintained, and drives predictive insights for clients. Across advisory, tax, and valuation services, Altus generates immense exhaust data that we believe gives Altus a significant edge in maintaining its moat and driving value for customers. We see recent acquisitions and a full platform rebuild (including a push to a full Cloud offering) as driving the next leg of Altus’ analytics-fueled growth.”
* Docebo Inc. with a “buy” rating and $75 target. Average: $69.50.
Analysts: “: Docebo has built out native AI-functionality across the platform and has a Generative AI solution in-market. We believe Docebo has built its market leadership in corporate LMS by being innovative, and we think that AI has accelerated this journey by enabling a higher-touch and personalized learning experience at scale. Over the last several years, Docebo has built out its own language models that power its productized Generative AI tool as well as other content creation, tagging, and interactive content.”
* Well Health Technologies Corp. with a “buy” rating and $10 target. Average: $8.20.
Analysts: “WELL’s unique positioning as a leading clinic network in North America creates an opportunity to aggregate, test, and integrate AI solutions to drive efficiency. The company’s AI Voice offering is a first example of a productized solution that automatically transcribes SOAP notes for practitioners (link to demo here). We see the potential for a product roadmap that ultimately provides a robust AI-assistant to doctors, enabled by WELL’s widely installed EMR and network.”
* Coveo Solutions Inc. with a “buy” rating and $12 target. Average: $11.
Analysts: “In our view, Coveo Solutions offers investors a pure-play on the AI growth theme. Over the past 12 years, Coveo has leveraged AI to develop its Relevance Cloud platform. The platform is able to ingest, retrieve, and index massive amounts of data from several internal and external sources, such as Adobe PDFs, YouTube Videos, RSS feeds, and SharePoint, to name a few, while also incorporating clickstream data and behavioral patterns. This data is then fed into the company’s internally developed AI and ML models. The model will then be able to, in real-time, find context and surmise what users are searching for or what content or information they require to complete a given task.”
* Converge Technology Solutions Corp. with a “buy” rating and $7 target. Average: $5.73.
Analysts: “Converge is a leading IT Service Provider for the mid-market, offering advisory, re-sell, and managed services solutions. The company’s advanced analytics practice has been a growth area for the company, with deep technical skills across data visualization, data integration, and other areas. Converge has a large team of data scientists and a diversified set of partner vendors, offering expertise and recommendations that add substantial value to mid-market clients.”
* D2L Inc. with a “buy” rating and $11 target. Average: $10.79.
Analysts: “For the last 10+ years, D2L has offered AIbased capabilities in products natively and through solutions partners. Current native AI capabilities adapt learning paths based on the learner’s performance, and predict the likelihood of learner success. AI-based solutions partners are integrated to detect plagiarism, provide audio-video captioning, translations, etc. New capabilities in development are leveraging Generative AI to improve instructor and learner efficiency and outcomes. For example, auto-generating quizzes for learner evaluation.”
* Propel Holdings Inc. with a “buy” rating and $15 target. Average: $13.13.
Analysts: “Artificial Intelligence permeates throughout Propel’s business. The company uses AI to improve its underwriting posture and the performance of its operations. On the former, its AI underwriting model has been in use for the past decade and is able to evaluate a borrower’s ability to repay their loans, using variables beyond a traditional credit score. This results in insights that can identify a creditworthy borrower who otherwise would be deemed uncreditworthy. Furthermore, AI is also used in customer acquisition, where Propel draws insights on customers they believe will better convert based on their marketing efforts. Within their operations, Propel is leveraging AI to improve their customer service. They leverage the use of Speech Recognition technology to understand the levels of customer service that their representatives are providing and thus constantly improve training methods.”
* MediaValet Inc. with a “buy” rating and $2.50 target. Average: $1.93.
Analysts: “MediaValet has been working with Microsoft’s AI engines for ~5 years, developing their own Cognitive Metadata Framework for Digital Asset Management (DAM). This includes integrating to run assets through AI engines/tools, pull back AI-generated metadata, ingest the metadata and associate it with the asset, and then make it searchable. MediaValet offers a full spectrum of AI capabilities for customers, including Optical Character Recognition (converting typed, handwritten, or printed text into machine-encoded text), FACE recognition (launching now), among others.”
* Wishpond Technologies Ltd. (WISH-X) with a “buy” rating and $1.30 target. Average: $1.70.
Analysts: “Wishpond enables high-value and costeffective SMB marketing, which makes the platform well-suited to incremental AI and automation tools. The company already has an AI Website Builder solution on the market and provided a demo at their recent investor day. Leveraging OpenAI’s platform, the tool generates a completely customized landing page for SMBs within minutes. The company’s public future development roadmap includes tools that will drive efficiency, such as an AI powered email responder and marketing newsletters.”
* Sabio Holdings Inc. (SBIO-X) with a “buy” rating and $3.50 target. Average: $3.06.
Analysts: “Operating a Connected TV ad ecosystem, Sabio has incorporated AI capabilities primarily into the insights engine it offers customers like brands and agencies. Leveraging ML, Sabio sifts through user data for interest and behavioral patterns, categorizes these audiences into targetable segments, and then delivers highly personalized ads. Also in play today are predictive analytics, which read historic trends to forecast and optimize ad performance.”
The analysts also recommended Quisitive Technology Solutions Inc.. They are currently under research restriction on the Toronto-based firm.
“As a reseller of Microsoft services and solutions, Quisitive is able to help clients identify and implement AI solutions. Quisitive has commented on opportunities to wrap AI into its own IP (including healthcare solutions) as well as improve the data digitization journey for customers. Quisitive is seeing customers and C-Suite executives explore AI solutions to build value in both revenue generation and cost optimization (labor, supply chains, and operation efficiencies). Within Quisitive’s payments offering, PayiQ, the company expects AI to enable insights and the commercialization of payments data.,” they said.