Three Promising Tech Stocks to Watch for High Returns
The tech industry has created numerous millionaires, but it has also led many investors astray. To uncover the next potentially lucrative tech investment, it’s essential for investors to find companies with competitive advantages, robust growth trajectories, and resilient business models.
Here are three high-growth tech stocks that fit these criteria: SoundHound AI (NASDAQ: SOUN), SentinelOne (NYSE: S), and Cloudflare (NYSE: NET). Let’s explore why these companies could be poised for significant growth in the years to come.
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1. SoundHound AI
SoundHound AI specializes in voice and audio recognition technologies. The company’s flagship app allows users to identify songs by playing a clip or humming. Additionally, the Houndify platform enables businesses to create their own customized voice recognition solutions. Notable users include Hyundai, Vizio, and Church’s Chicken.
In 2022 and 2023, SoundHound’s revenue grew by 47%. The company forecasts further growth of 79%-85% in 2024 and 86%-110% in 2025. This growth is expected to stem from both organic improvements and recent acquisitions, including SYNQ3, Allset, and Amelia. Collaborations with AI chatbot company Perplexity also aim to enhance its voice recognition features integrated into Nvidia‘s automotive platforms.
Despite not yet being profitable and trading at 14 times next year’s sales, SoundHound could see substantial gains as the generative AI market expands. Interestingly, Nvidia holds a small stake in this up-and-coming firm.
2. SentinelOne
SentinelOne operates in the cybersecurity sector, focused on using AI algorithms to replace human analysts. This method is said to improve speed, efficiency, and accuracy. The company’s Singularity platform combines on-premises and cloud-based technology.
SentinelOne has seen its revenue double in fiscal 2021, 2022, and 2023. Its dollar-based net retention rate increased from 117% to 132% during this period. While revenue growth continued at 47% in fiscal 2024, the retention rate fell to 114% as the uptick in larger clients slowed.
Looking ahead to fiscal 2025, the company expects revenue growth of 31%. Although concerns over slower growth led to a decrease in stock value below the initial offering price, SentinelOne may still represent a reasonable investment at 8 times next year’s sales. The potential for substantial growth remains as AI-driven cybersecurity solutions become crucial against rising cyber threats.
3. Cloudflare
Cloudflare is a prominent player in the content delivery network (CDN) market, helping to expedite the delivery of digital content for websites through a network of cached servers. The company also protects websites from bot-driven attacks.
Cloudflare’s revenue experienced strong growth with increases of 50% in 2020, 52% in 2021, and 49% in 2022; however, growth slowed to 33% in 2023 due to macroeconomic factors affecting client budgets. Its dollar-based net retention rate fell from a peak of 125% in Q4 2021 to 115% in Q4 2023. The company forecasts 28% revenue growth for 2024, with analysts predicting a 26% rise for 2025.
While Cloudflare continues to face challenges in securing large contracts, its growth rate outpaces that of other CDN providers such as Fastly and Akamai. Although it is not profitable under GAAP standards, analysts anticipate a 52% rise in adjusted earnings per share in 2024, followed by 15% in 2025. Given the increases in internet speeds and the prevalence of media-rich websites, demand for its services is expected to continue rising.
Should You Invest $1,000 in SoundHound AI Right Now?
Before making an investment in SoundHound AI, consider this:
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Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cloudflare, Fastly, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
