If you’re looking for a cheap — in value and entry price — artificial intelligence (AI) stock with versatile potential, consider Pagaya Technology (NASDAQ: PGY ). This AI stock is so cheap — trading at $11.85 per share — that even just a $200 investment could buy you nearly 17 shares.
This is an especially good time to pick up some shares, as the stock is down about 43% year-to-date and is trading near a 52-week low. The reasons for its decline have a lot to do with restructuring for future growth.
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Pagaya Technologies is a fintech that has developed AI technology for banks and financial institutions to evaluate and process loans. Its major focus is on “second-look” or non-prime loans, which are at risk of being rejected by banks. Banks then send them to Pagaya for an interview, and if they’re approved, Pagaya finds a lender in its network.
But it is expanding its services for primary loans with major banks Wells Fargo and US Bancorp which it uses to process loans more efficiently or to obtain more accurate terms. It is now also expanding into buy-to-let auto loans and point-of-sale loans, later paying companies such as Klarna.
Pagaya turned a profit last quarter, with $34 million in GAAP net income, compared to $272 million a year earlier. Its revenue rose 20% year over year while network volume rose 3% to $2.7 billion, but both were below expectations. Additionally, the company offered lower-than-expected revenue guidance for first-quarter and full-year earnings that projected slower growth. As a result, the stock price fell after the earnings.
But the low growth numbers and conservative guidance have more to do with the company shunning some of the riskier aspects of its business, which “remains profitable but exhibits high volatility in potential credit outcomes.”
For example, last year, the company exited its single-family rental (SFR) housing business, where it facilitated the acquisition of homes for institutional buyers, then managed those properties. Exiting that business has reduced its revenue and network volume, but the company is moving more toward an asset-light model of providing AI infrastructure that it looks more profitable, long-term.
