Back in March, when SoundHound AI (NASDAQ:SOUN) stock had surged up almost 260% on bullish sentiment linked to Nvidia (NASDAQ:NVDA), I wrote that investors might want to wait for a dip back to more reasonable levels before buying shares. The stock shed over 50% in April, presenting such an opportunity. Since then, positive news and a solid earnings report have driven the share price up over 5.5% from the April dip. With the stock up 163% year-to-date, is it too late to jump in? I don’t think so based on the company’s positive momentum and long-term potential upside.
It is still a bit richly valued when viewed through the lens of current relative metrics, but the growth potential is enticing enough to suggest the current price does not fully capture it.
SoundHound AI develops and commercializes voice, sound, and natural language artificial intelligence (AI) technologies for industries like automotive, food service, TV, IoT, and customer service. The company’s AI-driven solutions, including Smart Answering, Smart Ordering, and Dynamic Interaction, serve to enhance performance where adopted.
SoundHound Continues to Grow Its Footprint
In recent developments, SoundHound successfully acquired SYNQ3, becoming the AI provider for more than 10,000 active restaurant locations. The company also launched collaborations with big brands like Applebee’s and Church’s Chicken. Furthermore, SoundHound’s voice assistants will be embedded in a leading Asian electric car manufacturer’s luxury vehicle lineup and a major U.S.-based EV maker’s entire fleet later this year.
SoundHound shared that its potential total addressable market (TAM) for its restaurant “pillar” could exceed $100 billion, with over 1 million restaurants and about 30 million businesses in North America alone. That TAM grows dramatically when including international markets, to which the company plans to extend its services. SoundHound ended the quarter with a solid cash position of $226 million, giving it the financial flexibility to drive business growth and potentially pursue attractive acquisition opportunities.
Analysis of SoundHound’s Recent Financial Results
SoundHound recently reported a Q1 Non-GAAP EPS of -$0.07, surpassing market expectations by $0.02. Likewise, the company’s revenue of $11.59 million, which represents a 73% increase year over year, has exceeded market predictions by $1.49 million.
The company’s cumulative subscriptions & bookings backlog customer metric stood at $682 million, marking an approximate 80% year-over-year growth. Furthermore, the firm experienced a 60% year-over-year increase in the annual run rate of queries, which was over 4 billion in the first quarter.
Based on the strength of its opportunity pipeline, SoundHound has revised its full-year revenue forecast for 2024, raising the expectation (on the lower end) to fall within the range of $65 to $77 million.
What Is the Price Target for SOUN Stock?
Analysts following the company have been mostly bullish on the stock. For instance, Wedbush analyst Daniel Ives recently maintained an Outperform rating with a $9 price target on the shares, citing the expansion into restaurants as a significant step in the right direction toward profitable growth.
Overall, SoundHound AI is rated a Moderate Buy based on the recommendations and 12-month price targets assigned by six Wall Street analysts over the past three months. The average price target for SOUN stock is $7.15, which represents a 30.24% upside from current levels.
While the stock has been highly volatile, it has been trending up recently, climbing over 15% in the past week. It trades towards the middle of its 52-week price range of $1.49-$10.25 and demonstrates positive price momentum, trading above the 20-day (4.68) and 50-day (4.69) moving averages. One thing to keep an eye on is the rising short interest, currently at 18.22% of shares outstanding. If the stock continues to climb, investors closing out shorts could add fuel to the fire and accelerate the run-up in price.
SOUN Stock: Not Cheap, but Compelling Enough for Growth Investors
It can sometimes be difficult to separate the underlying investment thesis from the hype. In the case of AI-related stocks, this continues to be a challenge. Yet, with its ongoing expansion of services and rising earnings, separating fact from fiction is becoming clearer for SoundHound. The stock is positively trending on solid news and ongoing expectations for revenue growth. While not cheap, the upside potential is compelling enough for growth-oriented investors to consider.
