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The artificial intelligence (AI)-led rally has propelled many top tech stocks on Wall Street to new heights. While the long-term story remains convincing, elevated valuations have deterred some investors from adding to these names - and has left some of the market's top AI stocks vulnerable to profit-taking on any sign of weakness.
To that end, the recent correction in these three standout stocks could present an opportunity for investors to buy into the long-term growth story, as analysts remain overwhelmingly bullish on these industry leaders. Let's take a closer look at these three stocks, and why Wall Street is so upbeat on the prospects for each.
#1. Dell Technologies
Founded in 1984 by Michael Dell, who was then still a student at the University of Texas, Dell Technologies (DELL) has gone on to become one of the world's largest technology infrastructure companies. The company designs, develops, manufactures, and sells a wide range of computer-related products and services. This includes PCs, servers, data storage devices, and networking equipment, among others. DELL currently commands a market cap of $88.1 billion.
Up a whopping 66% on a YTD basis, Dell stock also offers a competitive dividend yield of 1.41%. Moreover, its modest payout ratio of 22.7% suggests DELL's dividends are well-covered, and leaves plenty of room for dividend growth in the future.
However, a mixed set of numbers in the latest quarter led to Dell stock nosediving, as revenue numbers missed Street estimates. Although Q3 revenue of $24.4 billion fell short of expectations for $24.7 billion, the figure was 10% higher than the previous year. The company reported earnings per share (EPS) of $2.15, up 14.4% on a YoY basis, which came in ahead of the consensus estimate of $2.06. This marked the 11th consecutive quarterly earnings beat from Dell.
On the balance sheet, Dell closed the quarter with cash reserves of $5.2 billion, compared to short-term debt levels of $5.6 billion, the latter of which declined from its start-of-the-year levels at about $7 billion.
With the global PC market experiencing a slowdown, Dell’s strategic shift towards the AI server market positions the company for growth. Currently, Dell holds a 15.6% share in the AI server market, which is expected to grow to 16.7% in the coming years. In Q3 alone, Dell shipped $2.9 billion worth of AI servers, showcasing its expanding presence in this high-growth sector.
Dell’s ability to provide a comprehensive ecosystem of hardware and software solutions is particularly appealing to enterprise customers aiming to accelerate their adoption of AI servers. Products like the Dell XE9680 (air-cooled) and XE9680L (liquid-cooled) represent cutting-edge AI rack-scale systems designed for high-performance data centers. These systems offer modular configurations supporting up to 72 GPUs per rack, making them the most compact and dense available in the market. By focusing on power efficiency, density, and integrated solutions, Dell has positioned itself as an ideal choice for AI data centers with high computational demands but limited physical space.
In its flagship PC business, Dell is also incorporating AI to enhance its product offerings. With decades of experience in PC manufacturing, Dell holds a competitive edge in the emerging AI PC market, which is projected for steady growth in the coming years. Currently ranked third among the top five PC makers, Dell accounts for 15.5% of global PC sales, demonstrating its enduring strength in the sector.
Further, Dell stock looks undervalued at current levels. Its forward price/earnings (p/e) ratio is 16.09, with a price/sales (p/s) ratio of 0.92 and a price/cash flow multiple of 12.68 - all of which are significantly below the comparable tech sector medians.
Overall, analysts have a consensus rating of “Strong Buy” for DELL stock, with a mean target price of $149.92, which denotes an upside potential of about 17.9% from current levels. Out of 20 analysts covering the stock, 15 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 3 have a “Hold” rating.
#2. Palo Alto Networks
Next up is Palo Alto Networks (PANW). Founded in 2005, the company is a leading global cybersecurity provider, offering a wide range of products and services. The company emphasizes AI-powered solutions, precision threat detection, and automation, making it a critical partner for enterprises navigating digital transformation and Zero Trust security. PANW currently commands a market cap of $128.8 billion.
PANW stock is up 35.8% on a YTD basis. The stock has largely recovered already from a 3.6% post-earnings drop on Nov. 22, when guidance came up short of expectations.
However, PANW's results for the fiscal first quarter were quite impressive otherwise with both revenue and earnings topping estimates. Revenues for Q1 stood at $2.1 billion, up 14% from the prior year, led by strength in subscription revenues ($1.8 billion, +16.1% YoY). EPS of $1.56 represented growth of 13%, surpassing the consensus estimate of $1.48. This marked the 16th consecutive quarter that PANW has topped Wall Street's bottom-line estimates.
Remaining performance obligation (RPO), a key indicator for a platform company that represents the total value of their customer contracts that have not yet been recognized as revenue, rose by 20% from the prior year to $12.6 billion.
In terms of cash flow, PANW reported net cash from operating activities of $1.51 billion in Q1, and closed the quarter with a cash balance of $2.3 billion and no short-term debt on its books.
Palo Alto Networks' growth is largely driven by its success in platformization, transitioning from single-point solutions to a unified platform that customers can purchase comprehensively. In Q1, customers expanded their advanced subscription services, incorporating additional modules such as Autonomous Digital Experience Management (ADEM) and CASB. Management anticipates achieving 2,500–3,500 platformization deals by FY30, reflecting strong customer adoption of this integrated approach.
In network security, Palo Alto Networks has realized growth through customer refreshes, capacity expansions, and selective competitive takeovers as organizations consolidate onto its NetSec platform. Additionally, the company has benefited from increased customer deployments of software firewalls to protect multiple cloud instances, further enhancing its market position.
There is also significant interest in PANW's Secure AI by Design portfolio, which currently supports over 750 AI applications and provides data loss prevention for more than 65 applications. The integration of Copilot capabilities across its three platforms has enhanced security processes for analysts, improving decision-making and accelerating remediation efforts. Internally, Palo Alto Networks has implemented a version of Copilot for its customer service team, enabling more efficient resolution of customer issues.
One of Palo Alto’s most valuable offerings is its automated SecOps solution, which allows customers to execute security tasks with greater precision and faster remediation times. This is especially critical as the threat landscape evolves to include AI-driven attacks, with SecOps providing automated defenses against these autonomous threats.
Analysts are expecting the company to report strong growth, with forward revenue and earnings growth estimates pegged at 15.37% and 46.10%, compared to the sector medians of 5.67% and 7.96%, respectively.
Overall, analysts have a rating of “Strong Buy” for PANW stock, with a mean target price of $415.59, indicating an upside potential of about 3% from current levels. Out of 47 analysts covering the stock, 34 have a “Strong Buy” rating, 2 have a “Moderate Buy” rating, and 11 have a “Hold” rating.
#3. Uber Technologies
We conclude our list with ride-hailing giant Uber Technologies (UBER). Founded in 2009 and based out of San Francisco, Uber operates as a global platform offering ride-sharing, food delivery (Uber Eats), and shipping and carrier services (Uber Freight), and is also developing autonomous vehicles. The company, which was added to the benchmark S&P 500 Index ($SPX) just about a year ago, currently carries a market cap of $150 billion.
UBER stock is up 15.9% on a YTD basis.
Uber stock stumbled after its Q3 earnings report, as investors zeroed in on slower-than-expected growth in gross bookings. Otherwise, Uber's numbers for the latest quarter came in ahead of Wall Street's estimates. Revenues of $11.2 billion were up 20% year over year, while earnings of $1.20 per share marked a quantum leap from the year-ago figure of $0.10, and easily outpaced the consensus estimate of $0.38.
Gross bookings clocked in at $41 billion, rising 16% from the previous year. Further, trips during the quarter grew 17% YoY to 2.9 billion, or about 31 million trips per day on average. Further, given that Uber has demonstrated an ability to increase prices above inflation in recent years, it's reasonable to assume the company can maintain trip fare growth at least in line with inflation going forward.
Net cash from operating activities and free cash flow were at $966 million and $905 million, respectively. Overall, Uber exited the quarter with a healthy cash balance of $6.2 billion, much higher than its short-term debt levels of $178 million.
Uber's competitive edge is rooted in its unique position as one of the few companies globally offering both mobility and delivery services. Additionally, Uber has stakes in other major platforms like Careem, Grab (GRAB), and Didi, which strengthens its market position. With over 160 million consumers using its platform, Uber is well-placed to introduce related offerings and expand its services further.
The company is also making significant strides in the autonomous vehicle space through strategic partnerships. In the UAE, Uber has partnered with WeRide, integrating WeRide’s autonomous vehicles into the Uber app for rides. In the U.S., Uber has partnered with Avride, initially launching delivery robots in Austin, followed by Dallas and Jersey City in late 2024, with plans for autonomous vehicles in Dallas by 2025. Another partnership with Waymo will see Waymo’s autonomous vehicles available exclusively through the Uber app in Austin and Atlanta, where Waymo has already been providing fully autonomous trips in Phoenix. Uber has also teamed up with GM's (GM) Cruise, planning to launch Chevy Bolt-based autonomous vehicles through the Uber app by 2025, without specifying any geographic restrictions for deployment.
Finally, Uber One adoption continues to be strong, underscoring the platform’s stickiness and its economic moat, both of which are crucial for driving long-term growth.
Analysts have deemed UBER stock a “Strong Buy” with a mean target price of $91.76. This indicates an upside potential of about 28.9% from current levels. Out of 44 analysts covering the stock, 36 have a “Strong Buy” rating, 3 have a “Moderate Buy” rating, and 5 have a “Hold” rating.
