Investment Analysis: Predicted Superiority of SoundHound AI or Palo Alto Networks Shares in 2025, as Per Wall Street Experts
In 2024, AI driven companies saw significant growth in the stock market. Companies leveraging AI in their business operations or aiding others in AI integration observed a surge in stock prices, and this trend appears set to continue in 2025. Two potentially lucrative stocks to consider are SoundHound AI and Palo Alto Networks.
SoundHound AI (SOUN -2.36%) and Palo Alto Networks (PANW -0.03%) could see considerable growth in the coming years, thanks to advancements in AI capabilities. SoundHound expanded its customer base with a 2024 acquisition, while Palo Alto Networks uses machine learning to defend against cyberattacks.
Analysts expect different trajectories for these two stocks. SoundHound is currently valued high, with a median price target of $9.50, implying a potential 35% drop. Conversely, Palo Alto Networks, valued at $214, holds a 23% growth potential, based on its median price target.
Investors should be aware of several key factors.
SoundHound: A High-Growth Stock with a Premium Price
SoundHound, established around 20 years ago, initially created an app to identify hummed songs. Now, it leads in conversational intelligence by combining audio recognition and natural language processing.
2024 was a significant year for SoundHound, as it acquired Amelia, a conversational AI leader. SoundHound now has customers across various industries, including restaurants, finance, healthcare, insurance, and automotive. Its revenue growth accelerated by 89% in the third quarter. Within six years, its combined subscription backlog will translate into over $1 billion in revenue.
The acquisition boosted SoundHound's customer base while increasing costs. Although management plans to realize synergies, it's unlikely SoundHound will reach its previous 75% gross margin. However, management aims to achieve profitability on an EBITDA basis by the end of 2025.
Palo Alto Networks: A Cybersecurity Powerhouse with AI Advantage
Palo Alto Networks is a prominent enterprise cybersecurity provider offering hardware, software, and cloud services. The company protects networks from unauthorized access and provides cloud and endpoint security.
In an era of increasing cloud adoption and remote workers, demand for Palo Alto's services has surged. By using machine learning, it quickly identifies threats and closes vulnerabilities. With an abundance of data and advancements in AI, Palo Alto Networks presents an unrivaled position to create effective algorithms.
Palo Alto's company-wide performance obligations grew by 20% year-over-year, while its software subscription revenues climbed 40% to $4.5 billion. Analysts forecast a $15 billion ARR by 2030.
As revenue grows, so will profits, benefiting from software sales' inherent leverage. Palo Alto Networks currently holds a price-to-sales ratio of around 12.2 times, compared to SoundHound's exorbitant 29 times. While not inexpensive, it's a reasonable price considering the company's strong profitability and competitive advantage.
Investors interested in the finance sector might consider SoundHound's stock for its potential growth, given its acquisition of Amelia and expansion into various industries, such as finance. However, the premium price of SoundHound's stock might require careful consideration and investment strategy, as its median price target suggests a potential drop of 35%.
Palo Alto Networks, on the other hand, is a strong contender in the cybersecurity field, leveraging AI to defend against cyberattacks. With an abundance of data and advancements in AI, Palo Alto Networks has the opportunity to create effective algorithms, making its stock an attractive investment option for those interested in investing in companies with an AI advantage.
