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With President Donald Trump handing out tariffs like Oprah and inflation coming in worse than expected, the market’s resilience is commendable as it hovers around its record levels. A key reason for this has been the unsatiable appetite for artificial intelligence (AI). Undeterred by Chinese AI upstart DeepSeek’s initial onslaught, corporations are doubling down on AI.
Palantir (PLTR) has been one of the key beneficiaries of this trend. Up a staggering 402% over the past year, the data analytics company has been on a winning spree. Wedbush analyst Dan Ives has been one of the early backers of Palantir. Safe to say, his pick has been a success.
Now, as Ives continues to remain bullish on the company, he is eyeing another company that could follow in its footsteps.
About Innodata Stock
Founded in 1988, Innodata (INOD) is a global data engineering company specializing in AI and digital content services. Innodata provides a range of solutions, platforms, and services that focus on data engineering to support generative AI initiatives. The company serves diverse industries, including technology, financial services, healthcare, and media, assisting clients in creating, managing, and distributing digital information.
Valued at a market cap of $1.6 billion, the INOD stock is up an impressive 618% over the past year.
Although such a stark performance may not be sustainable, is Ives’ optimism about Innodata based on reality? Let’s have a closer look.
Record Revenues
Innodata’s results for the most recent quarter exceeded expectations with both revenue and earnings surpassing estimates. In the third quarter 2024, the company reported record revenues of $52.2 million which marked yearly growth of 135.6%. Meanwhile, the EPS jumped to $0.51 from $0.01, thanks to the burgeoning top line and controlled costs.
Net cash from operating activities for the first nine months of 2024 was at $17.7 million, more than tripling the previous year’s figure of $5.8 million. Overall, the company exited the quarter with a cash balance of $26.4 million which was much higher than its short-term debt levels of $9.7 million.
Encouragingly, Innodata also increased its revenue guidance for 2024 with the company now expecting year-over-year revenue growth to be between 88% and 92%. In Q2, this was at 60%.
Growth Catalysts
Dan Ives’ bullish stance on Innodata appears well-founded, given the company’s multiple growth catalysts.
At the heart of its expansion lies Innodata’s strategic alignment with Big Tech and its emphasis on AI-driven solutions. The company’s core competency revolves around producing high-quality “supervised fine-tuning” data — effectively offering specialized consulting services that enable AI models to execute complex tasks with greater precision. Additionally, Innodata plays a crucial role in AI development by providing extensive text and data collection services essential for training these models.
By prioritizing tailored solutions, the company equips its clients with highly reliable datasets, refining their AI systems for more accurate outcomes. This positioning cements Innodata’s role as a fundamental player in the AI value chain. Furthermore, its ability to forge and sustain deep partnerships with leading technology firms in the generative AI space has been the primary driver of its growth. Looking ahead to 2025, these collaborations are expected to broaden, with an increasing number of projects and additional client contracts further strengthening its market position. Adding to this momentum, a recent federal contract win signals continued expansion into the coming year.
A key competitive advantage for Innodata is its proprietary approach to curating and refining high-quality datasets, providing AI firms with the essential raw material needed to develop sophisticated models. Unlike many competitors, the company identified this demand early and proactively invested in research and development, long before AI became a mainstream industry focus.
Finally, the scope of Innodata’s applications is vast, spanning industries such as social media, robotics, and financial services. By leveraging its expertise in AI training, it enables businesses to enhance customer service, optimize sales and marketing strategies, and ultimately boost profitability. Given the immense value Innodata delivers through its services—offering a significant return on investment — its role in the AI sector is only set to become more prominent.
Analyst Opinion
Overall, the analyst community shares Ives’ sentiments about Innodata, attributing to it a rating of “Strong Buy” with a mean target price and a high target price that have already been surpassed, indicating an upward revision may be needed. Out of four analysts covering the stock, three have a “Strong Buy” rating and one has a “Moderate Buy” rating.
