Prediction: 2 Stocks That Will Be Worth More Than SoundHound AI a Year From Now

Motley Fool
02-17
  • SoundHound stock soared last year on broader AI hype.
  • The stock trades at a lofty valuation, putting it at risk for a pullback.
  • GXO Logistics and Sweetgreen both have clear paths to growth.

SoundHound AI (NASDAQ: SOUN) has been one of the big winners in the AI boom so far.

Shares of the voice-activated AI specialist jumped by more than 800% last year, though it has cooled off a bit since. Investors have bet on the fast-growing company, which got its start as a music identification app like Shazam and now provides technology for automakers, restaurants, and other businesses to run voice-activated systems.

SoundHound has been growing fast as well, with revenue up 89% in the third quarter to $25.1 million, though acquisitions have helped drive that growth.

The stock trades at a sky-high valuation with a price-to-sales ratio of 63. That and a lack of profitability could set it up for a pullback this year since most of last year's gains seem to be due to hype on its association with AI.

The following two stocks look like good bets to be more valuable than SoundHound AI one year from now.

Image source: Getty Images.

1. GXO Logistics

GXO Logistics (GXO 8.54%) is the world's biggest pure-play contract logistics company. It operates nearly 1,000 high-tech warehouses, serving companies like Apple and Nike to make sure products get to where they are going quickly and efficiently, and process returns as needed.

Since being spun off from XPO in 2021, GXO Logistics has delivered generally strong results, but the stock pulled back sharply recently after management said that a potential acquisition of the company was no longer happening.

The stock is now down by roughly a third from where it was trading before that news broke in December, and its market cap is now slightly below SoundHound's at $5.1 billion as of Feb. 11.

However, GXO doesn't need a buyout in order to be successful. In fact, the company was spun off with the mandate that it would grow through acquisitions, consolidating its leadership in the industry. It bought Clipper Logistics and Wincanton in the United Kingdom and PFSweb in the U.S.

In addition to the disappointment with the lack of a buyout, the stock may be languishing due to weakness in the broader industrial economy and concern about tariffs. Nonetheless, the company is still on track for hitting its 2027 targets, which call for $8 billion to $12 billion in revenue and $1.6 billion in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA). The stock is trading at just three times that figure today.

If GXO can keep making progress toward that goal, the stock looks like a good bet to double or even triple by 2027, passing SoundHound along the way.

2. Sweetgreen

Another fast-growing company with the potential to overtake SoundHound in market cap this year is Sweetgreen (SG 0.11%).

The fast-casual salad chain has been growing quickly but has a market cap of just $3 billion. Nonetheless, it has many of the components of a winning restaurant stock.

Its average unit volume is $2.9 million, in line with industry leaders like Chipotle, and it's growing steadily with comparable-store sales up 6% in the third quarter, driving revenue up 13%.

Sweetgreen also has a secret weapon that may appeal to investors looking for exposure to AI. The company has been rolling out a kitchen robot called Infinite Kitchen. According to management, the technology helps improve throughput and saves on labor, improving financial results and customer satisfaction at its stores that have deployed them.

It is priced as a growth stock, but it has a lot of growth potential since it has less than 250 restaurants currently, it's the clear leader in the emerging fast-casual salad sector, and Infinite Kitchen gives it a competitive advantage.

Sweetgreen stock has pulled back recently, which sets up a buying opportunity, especially if it can keep up its recent momentum with solid top-line growth and margin expansion.

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