Key Points

Amplitude had a promising public offering, but the stock mostly struggled since 2022. After the recent acquisition, the company has finalized its platform, making its analytics software more compelling. It's set to launch an AI agent in June that could be a significant growth driver. 10 stocks we like better than Amplitude ›

Driven by the artificial intelligence (AI) boom, large-cap tech stocks soared since the pandemic.

Even factoring in the recent correction in the Nasdaq Composite, the tech-heavy large-cap index is up 16% from its 2021 peak, and the Nasdaq-100, which features the 100 largest Nasdaq-listed companies, is up more than 25%.

However, small-cap stocks haven't been so lucky. The Russell 2000 small-cap index is now down 16% from its peak in 2021, and small-cap tech stocks have struggled, too, as they've largely missed out on the AI boom.

One such stock is Amplitude (NASDAQ: AMPL), a cloud software company that specializes in digital product analytics. Amplitude went public in September 2021 just as the pandemic stock market was peaking. After initially surging out of the gate as its sales were booming, Amplitude tumbled in 2022 along with the much of the rest of the software sector.

Sales growth slowed as many of its customers had overbought during the pandemic when digital tools were seen as a necessity and the business struggled to grow as customers reduced their spend.

However, three years since that crash, the company is now moving forward as those churns have finished, and it's made acquisitions and product launches that have built out its platform to where management has wanted it to be.

The stock currently trades at nearly $12 a share and has a market cap of $1.5 billion. That along with its growth potential make it an attractive stock to buy even with just $1,000.Image source: Getty Images.

Where Amplitude stands today

Following the acquisition of Command AI last October, Amplitude finished building out its platform so that its customers no longer need to supplement it with point solutions.

Amplitude does everything its customers want from a product analytics platform, which they use to track how their e-commerce websites perform. Those products include guides and surveys, which allow companies to add bubbles to guide users along and survey them about their experience; session replay, which allows companies to see how users moved through their website; and heat maps, which indicate where users are spending the most time with their mouses.

Amplitude is introducing a marketing analytics tool next week, and will launch its AI agent in June, which will allow its customers to get recommendations directly from the AI agent rather than interpreting the data themselves. In an interview with The Motley Fool, CEO Spenser Skates said customers will "have hundreds of agents that are always looking over your data for you ... and finding trends and insights about how you can improve your product from that."

Story Continues

Amplitude's financial results have improved in recent quarters, but there is still room for its growth to accelerate. Reported revenue rose 10% to $80 million with annual recurring revenue (ARR) up 12% to $320 million. However, there are other metrics that point to stronger underlying growth in the business. The number of customers with ARR above $100,000 rose 18% to 617 as it continues to attract more enterprise-level customers and its remaining performance obligations grew 30% to $325.9 million as its customers sign longer contracts.

The company also announced a $50 million share buyback authorization to take advantage of volatility in the stock.

Why Amplitude looks like a bargain

Amplitude currently trades at a price-to-sales ratio of 4, which is reasonable for a stock with its growth rate, but the company has the potential to be significantly larger, especially as it's emerging as the leader in product analytics, taking market share from Alphabet's Google Analytics and Adobe Analytics.

The launch of its AI agent next month could be a catalyst for long-term growth, and the business appears to be at an inflection point as the components for its platform have come together.

Keep your eye on the AI agent coming out in June as that could help build momentum in the stock and make Amplitude a winner over the coming years.

Should you invest $1,000 in Amplitude right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe and Alphabet. The Motley Fool has a disclosure policy.

Have $1,000? This Stock Could Be a Bargain Buy for 2025 and Beyond. was originally published by The Motley Fool

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