Since 2023, the investing world has been swept up by the artificial intelligence (AI) frenzy. According to Precedence Research, the AI market could grow at a 19% compounded annual rate between 2023 and 2032, reaching $2.6 trillion - and many industries appear set to benefit.
While the bigger players like Nvidia (NVDA), Amazon (AMZN), and Microsoft (MSFT) are among the more popular AI stocks to pick right now, some smaller pure-play AI companies, such as SoundHound AI (SOUN), also have the potential to win big.
Just two months into the year, SoundHound AI stock has risen 211%, massively outperforming the S&P 500 Index’s ($SPX) 7.9% gain. This rally was fueled after chip giant Nvidia expressed interest in the small AI company, and SOUN also reported solid Q4 2023 results on Feb. 29.
AI stocks are undeniably attractive right now. However, diversifying one's portfolio with growth stocks from various sectors is beneficial in the long run. The second growth stock on my list is Kosmos Energy (KOS), which trades at around $6 per share. The company has excellent long-term prospects in the energy sector, as depicted by its recent robust fourth-quarter results.
Let’s find out why Wall Street believes these two stocks are a strong buy now.
1. SoundHound AI Stock
Valued at $1.8 billion by market cap, SoundHound AI is a voice AI solution provider that enables businesses to provide high-quality conversational experiences to their customers. Its robust AI offerings continue to strengthen its fundamentals.
In its 13F filing on Feb. 14, Nvidia disclosed a $3.7 million investment in SoundHound AI. Given Nvidia's market-leading position in AI, the tech behemoth's interest in SoundHound piqued investors' curiosity, which explains the massive stock surge.
In the most recent fourth quarter, revenue at SoundHound increased by a massive 80% year-on-year to $17.1 million. At the end of the quarter, its cumulative subscriptions and bookings backlog (revenue to be recognized in future) had doubled to $661 million from the year-ago quarter.
SoundHound is not yet profitable. However, it is working to reduce its GAAP (generally accepted accounting principles) net losses, which were $0.07 in Q4, down from $0.15 in the prior-year quarter.
Management is optimistic about the future, expecting revenue of around $70 million in 2024. The company expects to achieve positive adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) by 2025, with revenue potentially exceeding $100 million.
In 2023, the company launched several outstanding products, including Smart Answering, a voice AI product called Employee Assist for restaurants, SoundHound Chat AI for Automotive, and many more. These products may contribute to the company's growth in the coming years, propelling it to profitability. At the end of the quarter, it had $95.3 million in cash and cash equivalents.
Analysts predict that SoundHound's revenue will grow by 49% year-on-year to $69.3 million in 2024. In addition, analysts expect losses in 2024 to narrow to $0.25 per share from $0.40 in 2023. SoundHound's long-term potential is extraordinary. However, investors should be cautious, as the company still remains unprofitable.
Since SoundHound is still unprofitable, we will look at its valuation based on sales. SoundHound appears to be expensive, priced at 27 times forward projected sales for 2024.
What Is the Stock Price Prediction for SOUN?
Currently, five out of six analysts covering SOUN stock rate it as a "strong buy." Thanks to this year's explosive surge, SoundHound stock has surpassed both analysts' average price target of $4.43 and the high target price of $5. While the explosive rally and potential long-term prospects are appealing, investing in penny stocks necessitates thorough due diligence.
2. Kosmos Energy Stock
Founded in 2003, Kosmos Energy (KOS) is an oil and gas exploration and production company. Its operations involve the exploration, development, and production of hydrocarbons, with a primary focus on offshore oil and gas reserves around the world.
Kosmos Energy operates in key energy-rich regions such as West Africa, the Gulf of Mexico, and the Atlantic Margin. This diverse global footprint allows the company to mitigate risks.
While Kosmos stock is down 6% YTD, Wall Street expects around 45% upside for the stock this year.
In its recently reported fourth quarter, the company produced approximately 66,000 barrels of oil equivalent per day, a 12% increase year on year. Total revenue dipped in the quarter to $508 million, versus $563.7 million in Q4 2022. The company did, however, report a profit of $0.04 per share, up from a loss of $0.25 per share in the year-ago quarter.
Talking about long-term goals, Chairman and CEO Andrew G. Inglis stated that with the company’s ongoing developments and new projects, “we are confident in our ability to deliver growth through the decade while generating strong cash flow. This is expected to strengthen our balance sheet, help us achieve our leverage targets, while providing flexibility around future capital allocation opportunities including returns to shareholders.”
Management expects production to increase in 2024, “with additional wells at Jubilee coming online and the startup of the Winterfell and Tortue LNG projects.”
Kosmos remains well-positioned to capitalize on the evolving global energy landscape. Analysts predict a 12.4% increase in revenue to $1.9 billion in 2024, as well as a 28.5% increase in adjusted earnings. Furthermore, revenue and earnings are expected to grow by 10% and 12.6%, respectively, in 2025.
Trading at five times forward earnings, Kosmos remains a reasonably priced energy stock primed for growth in the coming years.
What is the Stock Price Prediction for KOS?
Currently, out of the seven analysts covering Kosmos stock, six of them rate it a “strong buy,” while one suggests it’s a “hold.”
Based on analysts' average price target of $9.14, Wall Street sees an upside potential of about 44.6% from current levels. Moreover, its high target price of $10 implies the stock could rise as much as 58.3% in the next 12 months.
