Small-cap stocks — companies with a market capitalization of between $250 million and $2 billion — can be a valuable addition to many portfolios, as they sometimes produce outsized returns, points out the Motley Fool in an article highlighting three smaller companies worth investing $1,000 in right now.
Innodata
Innodata, a provider of IT services and enterprise software with a market capitalization of $480 million, is not the most well-known company, but AI could change that, the Motley Fool believes. Innodata’s low-code software platform helps customers to utilize both traditional and generative AI to automate processes, perform manual tasks, and train models, freeing up employees to focus on more value-accretive work. Indeed, it has allowed Innodata to secure master service agreements with five of the so-called “Magnificent Seven” companies, the Motley Fool points out.
Since the beginning of the year, Innodata stock has doubled and then some. According to MarketWatch, all three analysts covering the stock recommend buying it. The average target price is $34.00 per share, more than double the last closing price.
Amplitude
Amplitude, with a $1 billion market capitalization, sells advanced data analytics software, which, the Motley Fool explains, helps companies to track users’ decisions and clicks and thus to determine how to best sell their products and services. Although the incumbent leader in this segment is Alphabet, Amplitude believes its platform offers more features, control, and transparency.
The Motley Fool points out that Amplitude’s revenue growth has slowed dramatically since 2022, in part because customers, having overinvested in its platform during the era of zero interest rates, have scaled back as they renew these contracts at lower amounts. In the second quarter of 2024, Amplitude reported that revenue grew only 8% versus the 48% growth seen in the second quarter of 2021. It guides for growth to bottom out in the third quarter of 2024 amid the termination of contracts with Russian customers due to sanctions, notes the Motley Fool.
Amplitude stock has dropped more than 22% over the last 12 months. According to MarketWatch, 10 analysts cover the company. Eight rate it a “hold,” with one “buy” and one “sell” between the other two analysts. The average target price is $9.75 per share, indicating 19% upside versus the last closing price.
SoundHound AI
SoundHound AI, with a $1.76 billion market capitalization, provides AI voice solutions across various fields. It has worked with Honda, Hyundai, and Jeep on voice-activated technology in their vehicles, notes the Motley Fool. Its clients also include companies in the food service industry, such as Papa John’s, which it helps to automate customer service. The company’s revenue is surging (up 54% year over year in the second quarter of 2024), the Motley Fool points out, while cash stands at over $200 million versus just $4 million in debt.
Over the past year, SoundHound AI stock has soared about 147%. According to MarketWatch, out of the seven analysts covering the company, six recommend buying the stock, while one has it as a “hold.” The average target price is $7.80 per share, indicating upside of more than 58%.
