SoundHound AI (SOUN) and MicroStrategy (MSTR) stocks have been on a meteoric rise in 2024, each climbing more than 500% year-to-date. To be specific, SOUN stock has surged an impressive 521% year-to-date, while MSTR stock has returned about 524% during the same period. These gains far exceed the S&P 500 Index's ($SPX) 28.5% increase.
SoundHound’s meteoric rise reflects the booming demand for its artificial intelligence (AI) solutions. The company has seen increasing adoption of its voice AI solutions across various industries, which has led to an acceleration in its top-line growth.
Meanwhile, MicroStrategy’s staggering rally is tied to its growing Bitcoin (BTCUSD) holdings and the cryptocurrency’s rising value. With Bitcoin prices surging in 2024, MicroStrategy has outperformed even tech heavyweights like Nvidia (NVDA), which gained a remarkable 200% over the same period.
While these stocks have rewarded investors handsomely, their extraordinary gains have also led to higher valuations. This raises the question: Can SoundHound and MicroStrategy keep climbing or are they due for a pullback?
SoundHound Stock in Review
SoundHound has emerged as a leader in the voice AI sector, positioning the company for sustained growth across various industries. It has had a particularly strong performance in the automotive industry.
Further, the company's transition toward a software-as-a-service revenue model adds stability, reducing reliance on large, one-time contracts and paving the way for more predictable income streams.
A significant shift in SoundHound's business strategy is its reduced customer concentration risk. Last year, the company’s top customer represented 72% of its revenue, which dropped to just 12% in the latest quarter. Additionally, the share of revenue from the top five customers has decreased from over 90% to less than 33%. This diversification highlights SoundHound’s success in broadening its customer base.
Besides the automotive sector, SoundHound has significantly expanded in the restaurant sector, securing contracts with top quick-service restaurants (QSRs). This growth reflects the company’s innovations in drive-thru phone ordering and employee support, further tapping into the growing trend of off-premise ordering.
Two other promising growth markets for SoundHound are customer service and electric vehicles. It has integrated its solutions with multiple major brands to assist with customer service solutions, and has secured agreements with leading EV manufacturers such as Honda (HMC) and Stellantis (STLA).
The Bottom Line on SOUN
Wall Street analysts maintain a “Moderate Buy” consensus on the stock due to the recent surge in SOUN’s stock price.
However, given its leadership in voice AI space, growing addressable market, revenue diversification, and strategic acquisitions, SoundHound is well-positioned to capitalize on AI adoption trends, and its stock could continue to climb higher.
MicroStrategy Stock in Review
MicroStrategy has emerged as one of 2024's standout performers. As the largest corporate holder of Bitcoin, MicroStrategy’s transformation from a software company to a hybrid tech-investment firm has been cheered by investors.
MicroStrategy’s growth story is tied to its ambitious plan to raise $42 billion over the next three years to further bolster its Bitcoin holdings. The proceeds will be used to fortify BTC holdings as a core treasury reserve asset, aligning with the company’s belief in the cryptocurrency's long-term value. With Bitcoin’s fixed supply and increasing global adoption, MicroStrategy aims to capitalize on its substantial Bitcoin assets.
MicroStrategy’s commitment to Bitcoin is further evidenced by its recent purchases. Since June 2024, the company has acquired 25,889 Bitcoins at a cost of $1.6 billion, averaging $60,839 per Bitcoin. This acquisition strategy aligns with the rising institutional interest in Bitcoin. As more institutional investors embrace Bitcoin as a legitimate asset class, MicroStrategy stands to benefit significantly from its substantial holdings.
While Bitcoin acquisition is a primary focus, MicroStrategy continues to solidify its software business, particularly its cloud offerings. The company saw a 93% increase in non-GAAP subscription billings in the third quarter of 2024, reflecting strong demand for its cloud platform. Despite potential short-term revenue declines from product licenses, this strategic pivot promises long-term growth by boosting customer retention and increasing subscription revenue. These developments further strengthen the financial foundation for MicroStrategy’s Bitcoin ambitions.
The Bottom Line on MSTR
Wall Street is optimistic about MicroStrategy’s future and has a "Strong Buy" consensus rating.
With its strong financial position, large Bitcoin holdings, and appreciation in the cryptocurrency's value, MicroStrategy stock could sustain its upward trajectory.
