It's not easy finding quality stocks with low share prices. Frequently, a proven company's stock has been bid up by investors to well over $20 per share, often trading in the hundreds of dollars.
But low-priced quality stocks are not impossible to find. Investors willing to act boldly can venture into promising stocks that maybe haven't grown enough or haven't quite done it long enough to win Wall Street over. These are riskier companies, but they have laid the groundwork for long-term success and offer investors more upside potential than standard household names.
You can buy these two enticing technology stocks with real potential for under $20 per share.
1. SoundHound AI
SoundHound AI (NASDAQ: SOUN) enters 2024 with streaking growth after fourth-quarter revenue shot up 80% year over year to $17 million. The company specializes in managing artificial intelligence (AI) for audio applications, including music and voice recognition, translating languages, and voice assistance. The company works with various automotive and restaurant brands and other consumer-facing companies like Snap.
SoundHound is aggressively investing in research and development. Management believes the company's technology is more capable than competitors' and that patents protect its competitive advantage.
The company estimates that the rise of connected devices and further integration of voice AI across many industries will grow its addressable market to $160 billion later this decade. That's an ample opportunity for a company still doing only $46 million in annual sales and carrying just a $2.75 billion market cap.
Investors will need to monitor its financials over the long term. SoundHound's aggressive research and development investments have rung up debt, and management is issuing stock to raise money:
SOUN free cash flow (quarterly) data by YCharts.
SoundHound burned just $14 million last quarter, so the existing cash should buy management time. Investors shouldn't want debt to continue rising while SoundHound is burning cash because it can't pay off that debt without tapping its balance sheet. It's something to watch.
Still, the long-term upside could be worth the risk if SoundHound can keep growing without hurting its financials too much.
2. IonQ
AI and other demanding technologies are pushing the limits of what modern computers can do. IonQ (NYSE: IONQ) is among the companies developing quantum computing technology, the next generation of computers.
Today's computers are binary. At their core, everything in computer language is either a one or a zero; like a light switch, they're either on or off.
Quantum computing uses quantum mechanics to break that rule. Instead of on or off, these switches could be in between in any number of combinations, almost like a dimmable light switch.
This would dramatically speed up how computers process data, a potential game changer for AI and other new applications. IonQ has developed quantum computers since 2015 but is still a very young business with just $22 million in revenue in 2023.
IONQ free cash flow (quarterly) data by YCharts.
As IonQ progresses in its development, revenue is forecast to nearly double to $41 million this year, with up to $90 million in anticipated bookings. The risk is where IonQ ultimately lands in the competitive landscape. This $2 billion company is a lottery ticket in this high-potential field.
The investing game plan
You might have noticed that both companies are showing very little revenue. Again, they have the potential to lead their respective fields, but these are very nascent investment opportunities. There is a good chance share prices will be volatile, so investors should approach them cautiously.
Consider a dollar-cost average strategy, buying a little at a time to average into a position while the price goes up or down. You won't perfectly nail the lowest price, but you won't overpay at the top.
It's a win-win that will let you reap the rewards if these companies can execute and prove themselves over the coming years.
Should you invest $1,000 in SoundHound AI right now?
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Justin Pope has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
