In the dynamic landscape of 2023, the stock market is staging a comeback from the challenges of 2022. Notably, the S&P 500 index has surged by 23%, while the Nasdaq Composite, known for its volatility, has recorded an impressive 52% gain. Despite these positive trends, some stocks seem to have missed the memo on the robust recovery. Toast (NYSE: TOST), a restaurant management expert, and SoundHound AI (NASDAQ: SOUN), specializing in artificial intelligence (AI), are two such stocks that have faced fluctuations in their prices over the past two years.
Both companies made their public debut through initial public offerings (IPOs) in the last two years, sparking concerns among investors about their long-term potential. However, I hold a contrary view. Despite their recent market entry, Toast and SoundHound have been making waves for years, and I see them as top-tier tech stocks with promising futures. Here’s why these stocks are poised as supercharged tech investments, making them compelling buys while their shares remain affordable.
Toast: Simplifying Complex Business Operations
Toast, a player in the restaurant management sector, offers a comprehensive platform for food service managers to streamline their operations. From menu and inventory management to customer payments, payroll processing, and effective marketing campaigns, Toast’s cloud-based software covers it all. In a highly fragmented food service market, where many restaurants use tools from multiple vendors, Toast’s modular platform stands out. It can start with a few functions and expand as businesses grow. The company’s efficient sales and marketing strategy, coupled with impressive growth figures (37% YoY revenue increase in Q3), positions Toast as a rising star in the industry.
With $3.6 billion in sales for the 12 months ending in September, Toast has only scratched the surface of its potential in the $55 billion U.S. market and a global opportunity at least twice as large. Trading at a mere 2.7 times trailing sales, Toast presents a compelling buying opportunity.
SoundHound: Transforming the Familiar into the Extraordinary
While many know SoundHound for its song-finding app, the company’s real prowess lies in its AI analysis. Leveraging nearly two decades of research, SoundHound has evolved beyond a simple app to become a leader in voice recognition and conversational AI experiences. The Houndify voice recognition platform is now integrated into various industries, including automotive, social media, and media streaming. The recent addition of Employee Assist, a powerful voice recognition tool for the restaurant business, showcases SoundHound’s ability to innovate and tap into diverse markets.
SoundHound’s revenue growth may be lumpier compared to Toast’s, but with soaring sales and diminishing bottom-line losses, the company is on a trajectory of success. Trading at 14 times sales, even after an 86% price drop from its all-time highs in May 2022, SoundHound offers a blue-sky growth potential for investors willing to navigate its volatility.
Conclusion: Navigating Towards a Tech-Driven Future
As the tech landscape evolves, Toast and SoundHound emerge as resilient contenders with the potential for significant gains. Toast’s dominance in restaurant management and SoundHound’s innovative foray into voice recognition position them as compelling choices for investors seeking supercharged tech stocks. While Toast presents a no-brainer buy at 2.7 times trailing sales, SoundHound’s unique expertise and client influx make it a tech stock with substantial growth ahead, albeit with heightened volatility.
