The "Magnificent Seven" are some of the most elite growth stocks around. Amazon was the worst performer of the group over the last five years, but it still delivered a market-beating 111% return. The best performer was Nvidia, which returned 2,830%.
However, after an incredible run in recent years, Wall Street has muted return expectations over the next year or so, which may reflect higher valuations for the group. The Magnificent Seven stock with the best near-term upside, according to analysts, is Google parent Alphabet, with 22% upside based on the average price target.
Investors looking for stocks with higher return potential should start their search in the small-cap arena. These are companies with market caps (share price times total shares outstanding) of less than $2 billion, and some are operating in exciting fields like voice recognition technology and electric aircraft that could experience strong growth in the coming years.
Here are two small-cap stocks with upside between 44% and 196%, based on the average Wall Street price target.
SoundHound AI (NASDAQ: SOUN) is a leader in artificial intelligence (AI)-powered voice technology that is seeing wide adoption with major brands in the restaurant and automotive industries. The company is posting impressive revenue growth that could send the stock higher next year. The average Wall Street price target is $7.79, according to YCharts, or about 44% above the current share price of $5.39.
SoundHound AI is a very small business, reporting just $13 million in revenue last quarter, but it's growing like there's no tomorrow. Revenue has consistently clocked in at more than 50% year over year recently. It could grow at high double-digit rates for several years as management pegs the addressable market for voice AI at more than $140 billion.
Some automotive brands recently upgraded to SoundHound Chat AI, which has accelerated customer engagement with SoundHound's products. The annual rate of queries with its voice AI platform reached 5 billion in Q2, up 90% year over year. The company has more than 15 years of data accumulation that has improved the accuracy of SoundHound's technology in understanding natural human speech, which gives SoundHound an advantage over competitors.
Stellantis, which owns several major car brands, including Jeep and Dodge, is using SoundHound Chat AI in its vehicles. SoundHound is also starting to see traction in other markets, including point-of-sale restaurant systems from Block's Square and Toast, in addition to millions of smart devices and TVs.