Share tip: Eagle Eye Solutions is a tech stock to watch

Eagle Eye Solutions, whose software powers loyalty programmes for the likes of Pret A Manger, Morrisons and Asda, is an archetypal British tech firm. It’s a minnow with a market capitalisation of only £150 million, but like all tech bros, it talks with a swagger. Eagle Eye, its homepage boasts, is “powering the personalised marketing revolution globally”.

Like the overall tech sector, which has been solemnly swearing for some time now that artificial intelligence is on the cusp of changing everything, Eagle Eye is adamant that its deployment of machine learning on its vast haul of data will power it ahead.

Beyond the bluster, though, are positive signs. Highly personalised digital marketing is a buzz phrase for retailers — and Eagle Eye’s AI platform allows brands to target individual customers with deals based on their likes and past shopping, and that data vault. It is already running at scale, sending out 750 million offers each week, and managing 100 million members of loyalty schemes.

Revenues for the year to June 29, 2023, rose by a third to £43.1 million, and post-tax profit doubled, albeit from just £600,000 to £1.2 million. More significant, however, was the extent to which clients stick with the firm once its platform sits in their “stack”: churn — quitting customers — was a mere 0.2 per cent. International growth is strong, with US revenues doubling last year.

Investec is a house broker, and this may colour perceptions of the near-evangelical tone it takes on Eagle Eye, which is singled out as an AI winner in the bank’s review of 2024 technology stocks. Analyst Julian Yates claimed it is “outshining most of the sector, delivering impressive growth”. He has a 900p target price — some way off the 515p at which Eagle Eye Solutions is currently trading, which itself is 12 per cent lower than a year ago.

Only weeks into 2024, Eagle Eye is showing that AI lucre is more than just talk: last week, it signed its first client — a large Canadian food business — to EagleAI, which offers a new way to autonomously concoct offers and target them to customers. “The first win is important,” said Katie Cousins at the investment firm Shore Capital. AI, she added, will result in Eagle Eye “leading an industry where effectively harnessing data to… generate incremental revenues is increasingly important”.

The make-up of the board heft may appease any nervous investors: Eagle Eye’s chief executive, Tim Mason, was the No 2 at Tesco for two years of Sir Terry Leahy’s tenure, and indeed, that retail king is now an Eagle Eye non-executive board member. The firm is interesting the industry and it’s not impossible a takeover could emerge from a retail giant that’s lagging on marketing tech — or a software giant could also be on the horizon. Buy.