Innodata Trades 29% Below 52-Week High: Buy, Sell, or Hold the Stock? (Revised)

Innodata INOD shares closed at $50.10 on Thursday, roughly 29.4% below the 52-week high of $71 it hit on Feb. 21, 2025. INOD shares have appreciated 26.8% year to date (YTD), outperforming the Zacks Computer and Technology sector’s return of 8.6% and the Zacks Computer – Services industry’s return of 0.9%.Innodata shares have outperformed closest competitors, such as Cognizant CTSH, Infosys INFY and ExlService EXLS YTD, shares of which have dropped 1.8%, 15.8% and 4.3%, respectively, over the same timeframe. Innodata benefits from massive investment promises made by the “Magnificent 7,” including Microsoft’s $80 billion and Meta Platforms’ $64-$72 billion. The data engineering company plans to invest in AI technology, supporting both current and prospective customers, as well as an expanding salesforce. In the second quarter of 2025, Innodata plans to invest $2 million to support its largest customer.INOD Stock’s Performance Image Source: Zacks Investment Research Innodata shares are now trading above the 50-day and 200-day moving averages, indicating a bullish trend. INOD Trades Above the 50-Day and 200-day SMAs Image Source: Zacks Investment Research However, INOD’s plan to invest in new programs before revenue realization is expected to weigh on near-term margins. Innodata targets an adjusted gross margin of 40%, which is significantly lower than the 43% reported in the first quarter of 2025 and the 41% in the year-ago quarter. Revenues from the largest customer are expected to decline 5% sequentially in the second quarter, which is a headwind.So, what should investors do with INOD stock? Let’s dig deep to find out.Expanding Clientele to Boost INOD’s ProspectsInnodata benefits from expanding Generative AI (Gen AI) capabilities for enterprises in 2025 and beyond. Contracts with eight Big Tech for Large Language Models (LLMs) data engineering, including five of the “Magnificent 7” that position INOD for strong growth. Innodata serves the Gen AI IT services market that is expected to be worth $200 billion by 2029, offering significant growth prospects. The company is building the capability to collect and create Gen AI training data as LLMs become more complex and advanced. INOD continues to invest in expanding languages like Arabic and French within domains like math and chemistry, for which the company is creating LLM training data and performing reinforcement learning.The company is expanding relationships with key customers, including a second master statement of work with its largest client, tapping a separate, significantly larger budget. The company secured approximately $8 million in new engagements from four of its other Big Tech customers. Formerly, small accounts are showing material expansion opportunities into multi-million-dollar bookings.INOD is onboarding several major clients, including top global firms in enterprise tech, cloud software, digital commerce and healthcare technology, each with significant growth potential. New customer acquisitions are expected to provide meaningful upside to both the top and bottom lines. The company expects 2025 revenues to jump 40% year over year to $238.6 million, driven by an expanding clientele. INOD’s latest Generative AI Test & Evaluation Platform, a new suite designed to help enterprises assess the safety and reliability of LLMs. Built on NVIDIA’s NIM microservices, the platform supports hallucination detection, adversarial prompt testing and domain-specific risk benchmarking across text, image, audio and video inputs, helping organizations build more trustworthy AI.Earnings Estimate Revisions Trend Steady for INODThe Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at 11 cents per share, unchanged over the past 60 days. Innodata reported break-even earnings in the year-ago quarter.  Innodata Inc. Price and Consensus Innodata Inc. price-consensus-chart | Innodata Inc. Quote The consensus mark for 2025 earnings is pegged at 69 cents per share, unchanged over the past 60 days, suggesting a 22.47% year-over-year decline.Valuation: INOD Shares Trading at a PremiumInnodata shares are trading at a premium, as suggested by the Value Score of F. INOD stock is trading at a premium, with a forward 12-month Price/Sales of 5.84X compared with the Zacks Computer Services industry’s 1.76X.Innodata shares are trading at a premium compared to its closest peers, including Cognizant, Infosys and EXLService. In terms of the forward 12-month P/S, Cognizant, Infosys and EXLService are trading at 1.75X, 3.81X and 3.17X, respectively.Price/Sales Ratio (F12M) Image Source: Zacks Investment Research ConclusionFor current shareholders, holding the stock may be justified given Innodata’s strong positioning in the growing generative AI safety domain and impressive revenue growth prospects. However, new investors might benefit from patience as the INOD stock remains overvalued.Innodata currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point to start accumulating the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.(We are reissuing this article to correct a mistake. The original article, issued on July 18, 2025, should no longer be relied upon.)Zacks Names #1 Semiconductor StockThis under-the-radar company specializes in semiconductor products that titans like NVIDIA don't build. It's uniquely positioned to take advantage of the next growth stage of this market. And it's just beginning to enter the spotlight, which is exactly where you want to be.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $971 billion by 2028.See This Stock Now for Free >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Cognizant Technology Solutions Corporation (CTSH): Free Stock Analysis Report American Noble Gas Inc. (INFY): Free Stock Analysis Report ExlService Holdings, Inc. (EXLS): Free Stock Analysis Report Innodata Inc. (INOD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks