Wells Fargo says this stock is a cheap way to play the AI boom

Couchbase could be the cheapest way for investors to gain meaningful artificial intelligence exposure, according to Wells Fargo. The firm initiated coverage of the database software stock on Monday with an overweight rating and a $26 per share price target, which implies roughly 24% upside from Friday's $20.98 close.

BASE 1Y mountain Couchbase stock. The company runs cloud database platforms, including Couchbase Server and Couchbase Lite, for both business and artificial intelligence applications. While the stock has slipped nearly 7% from the start of the year, it was up nearly 70% last year. Analyst Andrew Nowinski noted that Couchbase can drive annualized recurring revenue by more than 30% in the medium term thanks to its cloud service product Capella.

"Couchbase is essentially a 'poor man's MongoDB ' and is a cheaper way to play the AI market," Nowinkski said. "Adoption of the company's Capella SaaS solution is the key to driving 30%+ ARR growth, and is also the key to reaching operating income breakeven in FY27." The analyst also forecast a clear path to positive free cash flow in the next two to three years as well as profitability, which he says will "add valuation support." — CNBC's Michael Bloom contributed to this report..