International Business Machines Corporation (IBM - Free Report) recently announced that IBM Watson AI capabilities are enabling Spain-based Cerealto Siro Foods to introduce new products with aid of consumer insights.
In a bid to keep up with evolving consumer preferences, companies are adopting innovative digital transformation methods. This is where IBM’s AI services come in handy.
Cerealto Siro utilized IBM’s AI expertise to roll out “AI-informed snack” — rice cakes with pea and lentil — in the U.K. market loaded with nutritive value in accordance to consumer preferences.
IBM Services helped Cerealto Siro to devise an AI tool, I+Radar, which facilitates real-time analysis of consumer tastes.
We believe IBM’s innovative AI initiatives hold promise. The robust adoption of IBM’s hybrid cloud platforms, Watson services and other AI-driven offerings is expected to benefit the top line in the days ahead.
Into the Headlines
I+Radar tool integrates the AI capabilities of IBM Watson which can be accessed on the IBM Cloud comprising Watson Natural Language Understanding, Watson Knowledge Studio, and Watson Discovery News.
The AI functionalities enable the system to extract the global consumer preferences which are pronounced on various social networks like Twitter, scientific journals, blogs, and public forums.
The tool identifies popular trends and takes note of changes in consumer approaches. This makes introduction of any new product in the market easier.
Robust Broader Market Insights
Huge volume of data is being generated through a wide range of sources. The companies want to leverage AI to provide specific solutions and enhance solutions’ capabilities. IBM’s new Watson solutions provide a sorted ready-to-use data platform to the companies, consequently, accelerating their AI processes.
We must note that the number of companies utilizing enterprise AI is increasing. Per a report by IBM, customer satisfaction is the primary reason behind around 77% of organizations focusing on AI investments.
Moreover, per Gartner, IT spending is projected to hit $3.875 billion in 2020 from $3.650 billion in 2018. Further, IDC projects worldwide spending on AI systems to hit $79.2 billion by 2022 at a CAGR of 38% from 2018 to 2022.
Ongoing digital transformation initiatives and hyperscale datacenter development are the primary catalysts behind cloud-based IT infrastructure expansion. IBM is well poised to benefit from its growing presence in the enterprise AI market on an increasing clientele.
Additionally, IBM Cloud offers local EU-based support to clientele which limits access to only EU-based IBM employees. These factors are aiding the tech giant expand presence in Europe, which is a positive.
The expanding customer base also strengthens the company’s growth prospects in the digital transformation market, which per a MarketsandMarkets report, is envisioned to witness a CAGR of 18.1% to $665 billion by 2023 from $290 billion in 2018.
We believe that IBM is exploring the length and breadth of intertwined AI layers by providing solutions pertaining to specific industries. The aforementioned secular trends reinforce IBM’s growth prospects in the longer haul.
Competition a Woe
Rising competition from Amazon Web Services (AWS) and Microsoft Azure, which dominate the cloud infrastructure services market, is a headwind.
According to latest first quarter data from Synergy Research, IBM Cloud is classified as “strong niche player” with comparatively “lower growth rates”.
Zacks Rank & Key Picks
IBM carries a Zacks Rank #3 (Hold).
A few better-ranked stocks worth considering in the broader sector are eGain Corporation (EGAN - Free Report) , Rosetta Stone Inc. (RST - Free Report) and j2 Global, Inc. (JCOM - Free Report) , each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term earnings growth rate for eGain, Rosetta Stone and j2 Global is pegged at 30%, 12.5% and 8%, respectively.
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