ASX artificial intelligence (AI) shares have been all the rage in 2024. By all accounts, AI is set to revolutionise the way we eat, sleep, and think. You name it, and AI will probably have an impact on it at some point in the future.
What's exciting is that ASX-listed companies are among the cohort leading this wave of innovation. Even more exciting is that investors now have many means to gain exposure to AI themes.
For instance, the Global X Fang+ ETF (ASX: FANG) exchange-traded fund (ETF) enables investors to buy AI-linked stocks without overextending the risk budget. According to my colleague Tristan, the ETF has delivered annualised returns of 21% since 2021 and contains many of the US tech behemoths driving the AI impulse.
For investors eyeing individual AI stocks on the ASX, Life360 Inc (ASX: 360), Megaport Ltd (ASX: MP1), and Dicker Data Ltd (ASX: DDR) offer promising prospects for FY 2025, according to analysts. Here's a closer look.
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ASX AI share Life360 in focus
One of the more successful growth stories in FY 2024 was Life360. The company's share price has surged 105% this year, closing at $15.73 on Tuesday.
The company's core product, a smartphone app for location sharing, has become indispensable for families. It helps track children, elderly individuals, and those with special medical needs.
In Q1 CY2024, Life360's revenues jumped 15% year-over-year to US$78.2 million, while operating cash flow rose to US$10.7 million.
Analysts from Morgan Stanley are bullish on the ASX AI share, noting Life360's vast data collection capabilities as a major AI advantage.
Solaris Investment Management is also optimistic. Chief investment officer Michael Bell recently praised Life360's aggressive subscriber growth, which now boasts 66 million users. This expansive user base provides valuable data, fuelling AI-driven innovations.
Megaport in the AI revolution
Megaport's shares, which are currently trading at $10.96 apiece, have climbed more than 50% over the past year.
The company offers Network as a Service (NaaS), connecting businesses to cloud services, which is crucial for AI integration.
In its latest quarterly update, Megaport reported a 30% revenue increase to $49.5 million and a 92% rise in EBITDA to $14 million. Founder Bevan Slattery's ongoing strategic advisory role adds confidence, according to my colleague Bron. These are important takeouts for investors seeking exposure to ASX AI shares, in my view.
Goldman Sachs rates Megaport a buy with a $14.85 per share price target on its stock. In an April note, the broker says the ASX AI share was well positioned for growth in FY25:
We believe MP1 will benefit from strong structural tailwinds from the adoption of public cloud including multi-cloud usage and the transition towards NaaS technologies.
[W] are buy rated on the name as we remain confident MP1 has a clear product advantage vs. peers and a decade-long runway for robust growth.
Dicker Data – ASX AI share with mixed ratings
Dicker Data recently received a neutral rating upgrade from Goldman Sachs. The company's strong balance sheet and defensive revenues are key highlights in the investment debate, Goldman says.
The broker set a price target of $9.85 per share, which indicates a potential 4% upside from Dicker's closing price of $9.56 apiece at the time of writing.
Furthermore, the broker notes that effective inventory management and higher free cash flow generation could provide additional growth.
This, its high margins relative to peers, and "tight inventory management" means Dicker is well capitalised to grow its business – and potentially shares – in FY 2025.
The company had "a modest sales growth outlook of mid-single digit FY23-26E CAGR and appears fairly valued compared to peers and its cash flow generation potential", Goldman said.
Foolish takeaway
Life360, Megaport, and Dicker Data are three ASX AI shares well-positioned to grow in FY 2025, experts say.
Life360's extensive data collection, Megaport's essential cloud connectivity services, and Dicker Data's solid financial management could be standouts.
However, it's crucial to consider the risks involved and remember that past performance is not a guarantee of future results.
