Sometimes you should invest in skyrocketing stocks before they truly go stratospheric. In other cases, you want to buy shares of great companies when they’re way too cheap.
It’s easy to find both types of super-investable stock ideas in today’s market. Read on to see a great example in each category:
If you have $1,000 of investable cash on hand, you should consider these two tech stocks before anything else right now.
Netflix: The soaring media star
Netflix is a clear leader in the streaming industry, with a household-name brand, massive subscriber base of 270 million paid memberships, and an award-winning content library.
The stock might seem pricey at first glance, but the company’s recent streak of 52-week-high share prices are a testament to Netflix’s continued growth and potential for further expansion.
Key factors driving Netflix’s growth include:
Global expansion: Netflix is aggressively expanding into international markets, tapping into a vast pool of potential subscribers. What started as a tentative Canadian launch more than a decade ago has bloomed into 69% of the global subscriber base — and growing. This presents a significant growth opportunity, as the company expands its streaming services in new regions and cultures.
Original content: Netflix’s heavy investment in original content, including critically acclaimed series like Stranger Things and films such as Glass Onion: A Knives Out Mystery, has been a major driver of subscriber growth and engagement. This strategy not only attracts new viewers but also helps retain existing ones.
Technological innovation: The company continues to invest in technology, enhancing its streaming platform and user experience. This focus on innovation ensures that Netflix remains competitive and adapts to changing viewer preferences. Chief rival Walt Disney (NYSE: DIS) can only hope to catch up with Netflix’s technology advantage, according to Disney CEO Bob Iger.
Potential risks include:
Increasing competition: The streaming landscape is becoming increasingly crowded, with new entrants vying for subscribers’ attention. This could pressure Netflix’s growth and market share.
Content costs: Investing in original content is expensive, and the rising cost of acquiring licenses for popular shows and movies could also limit Netflix’s profitability.
Market saturation: There’s a limit to how many subscribers Netflix (or the digital streaming industry as a whole) can acquire, especially in mature markets. The company needs to continuously innovate and expand into new markets to sustain its growth trajectory.
Despite these risks, Netflix’s strong brand, vast content library, and global expansion efforts make it a compelling investment opportunity. The stock is rising again and could soon reach all-time high price levels.
The company’s soaring share prices reflect investor confidence in the long-term growth potential of streaming video services in general, Netflix in particular. For investors seeking exposure to the growing streaming industry, Netflix remains a top contender, even at its current valuation.
SoundHound AI: The undervalued growth story
SoundHound AI is a leading provider of voice artificial intelligence (AI) and conversational intelligence technologies. The company may not be a household name yet, but its potential for explosive growth is undeniable.
Based on a multi-decade history of voice-focused AI research, SoundHound AI boasts a staggering backlog of unfilled long-term orders, representing a massive revenue stream waiting to be unlocked.
“In Q1, we saw approximately 80% year-over-year [backlog] growth to $682 million, with an average duration of about seven years,” CFO Nitesh Sharan said on last month’s first-quarter earnings call.
This hidden gem in the tech sector appears poised for a breakout, making it an intriguing investment opportunity for those seeking high-growth potential.
SoundHound AI’s chief growth catalysts include:
Massive backlog of long-term orders: SoundHound AI has secured a substantial backlog of unfilled orders. This backlog, representing multiyear contracts with major clients such as carmaker Stellantis and restaurant chain Applebees, provides a clear runway for significant revenue growth in the coming years.
Voice AI technology leadership: The company’s advanced voice AI technology is gaining traction across various industries, including automotive, entertainment, hospitality, and more. SoundHound AI’s conversational intelligence platform enables businesses to enhance customer interactions, streamline operations, and improve overall efficiency. Even tech giants such as Amazon and Alphabet might be better off buying SoundHound AI than attempting to copy its sophisticated voice AI technology.
Growing adoption of voice AI: The global demand for voice AI technology is surging, as consumers and businesses increasingly embrace voice-enabled interactions. SoundHound AI is well-positioned to capitalize on this trend, with its innovative solutions and growing customer base.
Potential risks include:
Competition: The voice AI market is competitive, with several established players and new entrants vying for market share. SoundHound AI needs to continuously innovate and differentiate its offerings to maintain its competitive edge.
Execution risks: Successfully fulfilling the massive backlog of orders and scaling operations to meet growing demand will be crucial for SoundHound AI’s future success. Any delays or setbacks in execution could impact the company’s growth trajectory.
Market volatility: As a relatively young and emerging company (at least on the public stock market), SoundHound AI is susceptible to market volatility and investor sentiment. The stock price could fluctuate significantly based on market conditions and the company’s performance.
SoundHound AI’s impressive backlog of orders, coupled with its advanced voice AI technology and growing market adoption, make it an attractive investment opportunity. The stock trades more than 50% below its 52-week highs, which resulted from Nvidia making a small investment in the company.
The company’s current market valuation may not fully reflect its long-term growth potential, presenting a buying opportunity for investors seeking exposure to the burgeoning voice AI market.
While there are inherent risks associated with investing in a young and growing company, the potential rewards could be substantial for those willing to take a chance on this promising tech player.
Should you invest $1,000 in SoundHound AI right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet, Amazon, Netflix, Nvidia, SoundHound AI, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, Amazon, Netflix, Nvidia, and Walt Disney. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
The Best Stocks to Invest $1,000 in Right Now was originally published by The Motley Fool
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