SoundHound AI (NASDAQ: SOUN) has been one of many large winners within the AI increase up to now.
Shares of the voice-activated AI specialist jumped by greater than 800% final 12 months, although it has cooled off a bit since. Traders have wager on the fast-growing firm, which received its begin as a music identification app like Shazam and now gives know-how for automakers, eating places, and different companies to run voice-activated techniques.
SoundHound has been rising quick as nicely, with income up 89% within the third quarter to $25.1 million, although acquisitions have helped drive that progress.
The inventory trades at a sky-high valuation with a price-to-sales ratio of 63. That and a scarcity of profitability may set it up for a pullback this 12 months since most of final 12 months’s good points appear to be attributable to hype on its affiliation with AI.
The next two shares seem like good bets to be extra useful than SoundHound AI one 12 months from now.
Picture supply: Getty Photos.
1. GXO Logistics
GXO Logistics (GXO 8.54%) is the world’s greatest pure-play contract logistics firm. It operates practically 1,000 high-tech warehouses, serving firms like Apple and Nike to ensure merchandise get to the place they’re going shortly and effectively, and course of returns as wanted.
Since being spun off from XPO in 2021, GXO Logistics has delivered usually sturdy outcomes, however the inventory pulled again sharply lately after administration mentioned {that a} potential acquisition of the corporate was not taking place.
The inventory is now down by roughly a 3rd from the place it was buying and selling earlier than that information broke in December, and its market cap is now barely beneath SoundHound’s at $5.1 billion as of Feb. 11.
Nevertheless, GXO would not want a buyout with a view to achieve success. In truth, the corporate was spun off with the mandate that it will develop via acquisitions, consolidating its management within the business. It purchased Clipper Logistics and Wincanton in the UK and PFSweb within the U.S.
Along with the frustration with the shortage of a buyout, the inventory could also be languishing attributable to weak point within the broader industrial financial system and concern about tariffs. Nonetheless, the corporate continues to be on observe for hitting its 2027 targets, which name for $8 billion to $12 billion in income and $1.6 billion in adjusted earnings earlier than curiosity, taxes, depreciation, and amortization (EBITDA). The inventory is buying and selling at simply thrice that determine in the present day.
If GXO can maintain making progress towards that purpose, the inventory appears like a very good wager to double and even triple by 2027, passing SoundHound alongside the best way.
2. Sweetgreen
One other fast-growing firm with the potential to overhaul SoundHound in market cap this 12 months is Sweetgreen (SG 0.11%).
The fast-casual salad chain has been rising shortly however has a market cap of simply $3 billion. Nonetheless, it has most of the parts of a profitable restaurant inventory.
Its common unit quantity is $2.9 million, according to business leaders like Chipotle, and it is rising steadily with comparable-store gross sales up 6% within the third quarter, driving income up 13%.
Sweetgreen additionally has a secret weapon that will attraction to buyers searching for publicity to AI. The corporate has been rolling out a kitchen robotic referred to as Infinite Kitchen. In keeping with administration, the know-how helps enhance throughput and saves on labor, bettering monetary outcomes and buyer satisfaction at its shops which have deployed them.
It’s priced as a progress inventory, however it has plenty of progress potential because it has lower than 250 eating places at present, it is the clear chief within the rising fast-casual salad sector, and Infinite Kitchen provides it a aggressive benefit.
Sweetgreen inventory has pulled again lately, which units up a shopping for alternative, particularly if it will possibly sustain its latest momentum with stable top-line progress and margin growth.
Jeremy Bowman has positions in GXO Logistics, Nike, Sweetgreen, and XPO. The Motley Idiot has positions in and recommends Apple and Nike. The Motley Idiot recommends GXO Logistics, Sweetgreen, and XPO. The Motley Idiot has a disclosure coverage.
