ASX artificial intelligence (AI) stocks have leapt onto investor radars over the past year.
Interest has been surging amid the phenomenal gains achieved by generative AI chipmaker Nvidia Corporation (NASDAQ: NVDA) and the rapid technological advances delivered by US-based AI research organisation OpenAI.
While not all ASX AI stocks have joined in the rally, investors have sent the Ai-Media Technologies Ltd (ASX: AIM) share price surging 189.3% over the past 12 months.
AI Media shares closed yesterday trading for 81 cents apiece.
AI Media, if you're not familiar with it, provides live and recorded captioning, transcription, and translation solutions.
When the company released its full-year results (FY 2024) on 29 August, investors responded by sending the AI Media share price up 11.0% on the day.
Highlights from those results included a 7% year on year boost in revenue to $66.2 million, while gross profit of $42.5 million was up 15% from FY 2023. The ASX AI stock had a cash balance of $10.9 million as at 30 June.
Notably, the company's technology revenue increased by 37% from the prior year to $32.9 million.
Management said this result was underpinned by 40% growth in its flagship Lexi. Lexi is the company's AI-powered captioning and transcription solution.
Now, here's why Tamim Asset Management thinks AI Media shares could gain another 14% over the shorter term and rocket 1,000% or more over the next few years.
ASX AI stock well-placed for long-term growth
"AI Media has been transforming its operations from a services-based business to a technology-focused company, centred around AI-powered language services," the asset manager noted.
Tamim said this transformation is a core part of the ASX AI stock's strategy of moving toward higher-margin, recurring technology revenue.
"AI Media aims to have 80% of its revenue come from technology by December 2025, up from the current 50% level," Tamim said.
The asset manager noted that AI Media's ambitious five-year targets include achieving $150 million in revenue and $60 million in earnings before interest, taxes, depreciation and amortisation (EBITDA).
Management intends to achieve this goal by focusing on geographic expansion, sector diversification, and new AI-powered product launches.
According to Tamim, which owns shares in the ASX AI stock:
AI Media represents one of the most promising AI-focused companies on the ASX. With a strong foothold in global markets, AI Media's business transformation, bolstered by its flagship Lexi platform, positions it well for long-term growth.
The company boasts strong revenue and profit growth, a cash-rich balance sheet, and a highly committed leadership team.
The asset manager said that with 35% annual revenue growth, it values AI Media at around 90 cents a share in the medium term. That's 11% above yesterday's closing price.
And longer term, Tamim said this ASX AI stock has 10-bagger potential.
The asset manager added:
As AI Media continues its rapid transition, the market is likely to price it according to its trajectory towards its five-year goal of $150 million in revenue and $60 million in EBITDA.
At that point, a valuation of $5.00+ is achievable, making AI Media a potential ten-bagger over the next few years.
