Gen AI ‘enabler’ stock is expected to rise 40%, say analysts about Informatica shares
Informatica , a U.S.-listed software developer, is well-positioned to benefit from the rise of artificial intelligence, according to analysts at Scotiabank. The California-headquartered firm last month launched its AI model — CLAIRE GPT — which is designed to help businesses use their data for generative AI applications. Generative AI, or GenAI, is the technology behind the hugely popular chatbot ChatGPT and other similar products. It uses large amounts of data to create new content, like text and images — but relies heavily on well-managed and high-quality inputs to produce reliable results. “Fragmented and poor-quality data create flawed generative AI with unreliable insights, bias, trust issues, hallucination, and risks – such as possible [intellectual property] infringement,” said Scotiabank analysts led by Patrick Colville in a note to clients. “Informatica has been helping solve data management problems for customers for 30 years, and we believe the company should be a well-placed partner as businesses embark on generative AI journeys.” INFA 1Y line The company says its AI model can answer customer queries about their business by retrieving data from several linked systems such as Salesforce, Tableau, Snowflake, Amazon ‘s AWS and internal databases – a process that could take engineers or analysts days to complete. However, Scotiabank cautioned that the financial benefits may not materialize immediately, noting that “usage of Informatica for generative artificial intelligence is in its very early innings” and that it will likely not be a significant revenue driver in 2024. The investment bank expects shares to rise to $33 over the next 12 months, indicating a 15% upside. Wall Street’s bullish Wall Street analysts elsewhere are significantly more bullish, however. According to FactSet, the average price target of 16 analysts points to a 39% upside for the stock. RBC Capital analysts expect the stock to rise by 43% to $41 a share over the next 12 months. They suggest that while competitors such as Salesforce , Snowflake , and Microsoft also have generative AI models on offer, Informatica has a unique advantage thanks to its flagship Intelligent Data Management Cloud product. “Informatica has access to an enterprise’s entire data estate vs. other tools that have a narrow view into just their specific repository,” said RBC analysts led by Matthew Hedberg in a note to clients on May 22. “ClaireGPT has broader context and can give a more complete analysis to answer complex questions about an enterprise’s data.” Earlier in April, the Wall Street Journal reported that Salesforce had expressed an interest in acquiring Informatica, valuing the company at about $10 billion, around 5% higher than its current market capitalization. However, a subsequent report said the potential deal had fizzled out . Informatica’s share price has risen around 62% over the past 12 months.
