Citi's AI Pick ExlService Eyes 22% Gain, Outshines GM

Citi highlights ExlService for its AI growth potential with a 22% upside, while GM outshines Tesla in the EV market with a 113% upside.

By Alex P. Chase

5/15, 19:43 EDT
ExlService Holdings, Inc.
General Motors Company

Key Takeaway

  • Citi identifies ExlService Holdings as a top AI stock pick, predicting a 22% upside with its strong growth in data and AI services.
  • ExlService's revenue from data and AI has grown at a 32% CAGR since 2020, now making up 51% of its total revenue.
  • General Motors recognized for outperforming Tesla with a potential 113% upside according to Citi, highlighting GM's effective EV strategy and market execution.

ExlService Holdings' AI Opportunity

Citi has spotlighted ExlService Holdings, a U.S.-listed analytics and digital solutions company, for its significant growth potential in the data and artificial intelligence (AI) sector. According to a May 8 note from Citi, ExlService differentiates itself through a unique combination of domain expertise, data, and AI capabilities, enabling the company to embed AI into client workflows effectively. This approach has led to a compound annual growth rate of 32% in its data and AI-led business since 2020, now constituting about 51% of its 2023 revenue. The company's pivot to data and AI in recent years has expanded its total addressable market to $950 billion, nearly tripling from $350 billion. Citi also highlighted ExlService's strategic growth drivers, such as leveraging data capabilities for targeting higher-value customers and enhancing revenue through partnerships. With over 13,000 experts in AI, generative AI, data, and digital fields, ExlService is well-equipped to meet growing demand. The company has set medium-term targets for 2024-25, aiming for double-digit revenue growth, incremental margin improvement, and faster-than-revenue EPS growth. Citi's analysts commend ExlService's positioning to continue its industry-leading growth and execution, with a current demand pipeline for its data and AI services standing at $2 billion. The bank has assigned a buy rating to the stock with a price target of $37, indicating a potential upside of 22%.

General Motors Outshines Tesla

In the automobile industry, General Motors (GM) is gaining attention as a potential leader in the electric vehicle (EV) market, despite the sector's challenges, including slowing sales and sluggish adoption rates. This comes as Tesla faces a 31% decline in shares this year, raising questions about its ability to maintain its EV market share and fulfill its full self-driving initiatives. Analysts from Citigroup and Bank of America are optimistic about GM's prospects, noting the company's 26% stock increase in 2024, which significantly outperforms the S&P 500's 9.5% gain. Citi analyst Itay Michaeli emphasized the critical nature of the upcoming quarters for GM's EV execution but remains positive about the company's risk/reward setup. Citi has set a buy rating on GM with a $96 per share price target, implying a 113% upside. Bank of America and JPMorgan have also expressed bullish sentiments, with price targets of $75 and $58 per share, respectively. GM's strong performance is attributed to exceeding Q1 sales and earnings estimates and revising its full-year outlook upwards, demonstrating effective management and investment in future technologies.

Street Views

  • Citi (Bullish on ExlService Holdings):

    "With AI, EXLS views its differentiation and opportunity in its ability to combine domain, data, and AI expertise to embed AI into client workflows and fine-tune models to get higher accuracy levels... We continue to like EXLS’ positioning to meet these demand trends and continue its industry-leading growth levels along with its beat-and-raise execution."