The stock market had a great year in 2023, largely bringing it back from the inflation-flavored plunge of 2022. The market barometer S&P 500 rose by 24.2% while the tech-heavy Nasdaq Composite index jumped 43.4%. The Federal Reserve's anti-inflation measures brought price growth back down, and the tech sector celebrated the arrival of powerful new artificial intelligence (AI) systems like OpenAI's ChatGPT.
But some top-notch stocks weren't invited to last year's Wall Street party. At the start of February 2024, you'll still find some great investments biding their time in the bargain bin.
The signs of better days ahead are already piling up, as the looming recession threats of yesteryear recede and a new bull market has become official. For investors, it's high time to take action before the ongoing bull run really takes off.
My list of bargain stocks ready to soar in 2024 includes SoundHound AI (SOUN 5.77%) and The Trade Desk (TTD 1.67%). If you don't already own shares of these innovators, you might want to open a position while the shares are cheap. And if you already do, this could be a great time to double down on them.
1. SoundHound AI
At its core, SoundHound AI specializes in developing cutting-edge voice recognition and natural language understanding technologies. You may know the company for its namesake app that can identify songs within earshot of your smartphone. These days, the AI-based technology that underlies that app has evolved into a full-fledged voice control platform for cars, drive-through windows, phone menus, and more. SoundHound AI's innovative solutions are designed to transform how businesses and consumers interact with devices and services using voice.
You'd think any company with "AI" in its name would have caught last year's artificial intelligence fever in a big way. 2023 sure started out that way and the stock more than doubled year-to-date on a couple of occasions.
But its rally lost momentum over the summer as a sluggish market recovery from the inflation crisis hammered unprofitable growth stocks. SoundHound AI closed the year with a 19.8% gain, underperforming the major market indices.
The market may have treated SoundHound AI like a red-headed stepchild in 2023, but the company's business is booming.
- Trailing revenues have roughly doubled over the last five quarters. Product royalties are soaring as the company adds more household-name businesses to its client list.
- On the bottom line, it's moving closer to the breakeven point quarter by quarter. As sales rise, profit margins benefit from economies of scale, an effective cost-cutting effort, and more efficient use of data center assets.
- SoundHound AI launched a full-service voice assistant system for restaurants in November. Early partners -- and cross-selling opportunities -- include sector giant Block and up-and-comer Toast. Three weeks later, the company acquired SYNQ3 Restaurant Solutions to boost the new product and add more than 10,000 established SYNQ3 clients to its customer list.
I can't wait to see the difference the restaurant service platform can make to SoundHound AI's financial results. This little company has big ambitions, and the bull market should light more fires under its growth engines.
In other words, you should take a look at this low-priced AI stock before it takes off.
2. The Trade Desk
Let's talk about digital advertising services. The Trade Desk (TTD 1.67%) operates at the forefront of online marketing with a cutting-edge platform for highly automated ad-buying solutions.
The company stands head and shoulders above the competition thanks to 15 years of operating history, deep integration with many different ad-publishing channels, and an unmatched treasure trove of media-consumer data. In addition to these competitive advantages, The Trade Desk created an open-source user tracking technology known as Unified ID 2.0 (UID2) that helps advertisers track and evaluate their marketing efforts while maintaining the privacy of individual ad viewers.
Digital marketing is luring ad dollars from more traditional channels like TV and radio ad spots, billboards, and newspaper blurbs. Targeted ads backed by The Trade Desk's data collection and analysis tools are simply more effective than spreading the same message across a wide area and hoping for the best.
When The Trade Desk does its job right, ad-buying clients reap greater consumer interest, click-through rates, and sales from their marketing budgets. This business method results in some mind-boggling advantages for The Trade Desk itself.
When times are hard and consumers hold on to their money with an iron-fisted grip, companies don't want to spend a lot on advertising. Why launch a lavish ad campaign when nobody is ready to buy stuff, right? However, it stands to reason that The Trade Desk's business will continue to grow under these circumstances since the company is all about juicing the effect of its clients' ad budgets.
Indeed, that's how the high inflation and rising interest rate environment worked out for The Trade Desk -- looking at its three-year revenue chart, can you even tell where the digital ad industry's widely reported downturn fell?
TTD Revenue (TTM) data by YCharts.
CEO Jeff Green highlighted how his company is taking market share these days, not only from old-school marketing solutions but also from other digital marketing specialists.
"Magna Global estimates that the overall U.S. advertising industry is growing at 5% this year, and digital spend or the digital ad market pie is expected to grow by 10%," Green said on November's third-quarter earnings call. "Clearly, we are significantly outperforming the rest of the advertising market. This builds on our market share gains from last year when we grew 20%-plus each quarter and our competitors were posting negative to low single-digit growth."
And here's the best part. The clients who got used to working with The Trade Desk during the lean years are likely to stay aboard when larger advertising budgets make sense again. Why switch back to a less effective ad-buying process after getting used to a better one?
So The Trade Desk thrives in challenging markets, then builds on those habit-changing periods with accelerated business growth when the sun shines again. The company's growth prospects are particularly impressive right now, as the world is swinging back into ad-buying after a long downturn, and UID2 is ready to take over as leading browsers turn off the old tracking solution known as third-party cookies.
Yet The Trade Desk's stock caught a milder version of SoundHound AI's market risk fever last year. The stock currently trades 25% below the 12-month high it reached last summer.
The time to buy The Trade Desk stock is now, in my humble opinion. I can't promise that the fourth-quarter report it's delivering in two weeks will show a complete return to free-spending form by ad buyers, but another robust report with good-looking guidance for the next period could be enough to relieve the price pressure that has been holding this stock down recently.
