Palantir Technologies (PLTR) and Soundhound (SOUN) stocks have been on a meteoric rise in 2024. PLTR stock has surged an impressive 121% year-to-date, while SOUN stock has outpaced even that, gaining over 133% during the same period. These gains far exceed the S&P 500 Index's ($SPX) comparatively modest 19.9% increase.
Moreover, Palantir - known for its enterprise software solutions - has registered a staggering 169% growth over the past year, placing it among the top-performing large-cap stocks. Soundhound, which specializes in voice AI technology, hasn’t lagged behind either, boasting a remarkable 171% gain and establishing itself as a top performer among small-cap stocks.
The surge in both PLTR and SOUN stocks reflects the soaring demand for their artificial intelligence (AI) solutions. Businesses across sectors are increasingly adopting their solutions and platforms to enhance operational efficiency, driving substantial revenue growth for PLTR and SOUN and expanding their customer bases.
However, as both of these stocks have collected incredible gains, they have become expensive on the valuation front. This elevated valuation suggests that much of their potential upside in the near term may already be priced in.
Against this background, let’s take a closer look to determine whether investors should step away from PLTR and SOUN stock for now.
What Do Analysts Say About Palantir Stock?
Palantir (PLTR), one of the newest S&P 500 stocks, has consistently posted solid financial results, and the last reported quarter (Q2 2024) was no exception. Q2 revenue jumped 27% year-over-year, reflecting accelerating growth over recent quarters. This acceleration in its top-line growth rate is led by solid demand for its Artificial Intelligence Platform (AIP).
Palantir highlighted that AIP helped secure several significant contracts. In Q2, the company signed 27 deals worth $10 million or more, bringing the total contract value to nearly $1 billion for the quarter. This underscores the high demand for Palantir’s AI-powered solutions and its success in retaining and growing revenue from existing customers.
The company's ability to generate more revenue from its existing client base provides a strong foundation for future revenue and earnings growth.
In terms of operating metrics, Palantir's total remaining deal value reached $4.3 billion, a 26% increase from last year. Additionally, its remaining performance obligations (RPOs), or future revenue commitments, surged by 41% to $1.4 billion. The company's net dollar retention rate also improved by 300 basis points to 114%.
Palantir’s solid performance metrics, growing contracts, and introduction of new products position it well to capitalize on the rising demand for AI in the enterprise market, which could drive long-term returns.
Thanks to its higher growth prospects, Palantir’s premium valuation is warranted compared to its peers. However, given the notable rally, PLTR trades at a price-to-sales (P/S) ratio of 37.07, which is far above the sector median of 2.88. This steep valuation gap is a concern, and has led many analysts to remain cautious about the stock’s short-term potential.
Notably, analysts’ consensus rating is “Hold” for PLTR stock. The average price target of $25.69 suggests an expected correction of about 30% for Palantir stock from current levels.
What's the Forecast for Soundhound Stock?
Soundhound (SOUN) is a leader in voice AI technology. The company has consistently grown its revenue by over 50%, showing solid demand for its offerings. Its Q2 revenue was up 54%, and the cumulative subscriptions and bookings backlog roughly doubled year over year to $723 million.
Soundhound is experiencing a surge in customer engagement, with strong demand for its products, including SoundHound Chat AI and AI Customer Service solutions. As a result, the company expects its revenue to cross over $150 million in 2025. This suggests that its top line could almost double from its forecasted revenue of $80 million for 2024.
The company is eyeing a vast total addressable market (TAM) exceeding $140 billion. Soundhound's leadership in the conversational AI market gives it a significant advantage, with considerable barriers to entry creating a competitive moat. The company is increasing its market reach and growth potential by expanding into major industries such as healthcare, insurance, and financial services.
Soundhound is broadening its customer base by working with hundreds of large enterprise brands, ensuring that no single client accounts for more than 10% of total revenue. This diversification strengthens the company’s financial stability. Additionally, SoundHound focuses on cross-selling and up-selling opportunities, leveraging its proprietary technology and cloud migration to reduce costs and enhance profitability.
The company is also tapping into new monetization opportunities within voice commerce, expanding its offerings from food ordering to ticket purchases and appointment scheduling. Moreover, Soundhound is exploring strategic acquisitions to bolster its portfolio and enhance its competitive edge, paving the way for future growth.
Overall, Soundhound is well-positioned to deliver strong financials due to the growing demand for its AI solutions, increased enterprise spending on generative AI, and its large addressable market. While Soundhound stock trades at a significant premium compared to its peers, Wall Street remains optimistic about its future, with analysts giving it a “Strong Buy” consensus rating.
The price target of $7.58 suggests a potential upside of 54% from current levels, signaling a significant growth opportunity for investors.
The Bottom Line on PLTR and SOUN
Palantir and Soundhound are two stocks that have experienced impressive gains in 2024, driven by strong demand for AI solutions. However, their currently high valuations suggest that much of the near-term upside may already be priced in. Analysts remain cautious about Palantir, which has a “Hold” consensus rating and a price target that shows expectations for a potential correction. In contrast, analysts view Soundhound’s long-term growth potential more favorably, with a “Strong Buy” consensus rating and substantial projected upside potential.
On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
