The fervor for artificial intelligence (AI) in the market may have toned down, but its glow remains undimmed. While the limelight often shines on industry titans, smaller players are making waves in the expansive ocean of AI integration.
One such under-the-radar gem is SoundHound AI (SOUN), a pure-play AI firm that has delighted investors and analysts with its recent robust performance. Specializing in voice AI technology, SoundHound AI leads the market with its advanced voice recognition and natural language processing solutions through its Houndify platform. Serving a multitude of sectors like automotive, hospitality, retail, and smart home devices, the company has carved a niche for itself in the AI realm.
Surging by an impressive 133.5% year to date, SOUN stock has outpaced the S&P 500 Index’s gain of 17.6%. Despite its meteoric rise, Wall Street’s enthusiasm for SOUN remains unbridled, anticipating further explosive growth amidst the burgeoning AI customer service industry and the company’s strategic acquisitions.
SoundHound AI is Gaining Strength
SoundHound AI’s Houndify platform is on an upward trajectory, particularly in sectors clamoring for customizable voice solutions, translating into robust financial performance.
In the recent second quarter, total revenue soared by 54% year-on-year to $13.5 million. The cumulative subscription and booking backlog doubling to $723 million underscores the company’s upward momentum.
Noteworthy is SoundHound’s acquisition of leading enterprise AI software company, Amelia, for $80 million in cash and equity. This move is expected to widen the firm’s conversational AI services into new horizons, potentially ushering in profitability by 2025.
Moreover, forging key partnerships with industry stalwarts like Hyundai, Mercedes-Benz, Chipotle, Samsung, Nvidia, and Qualcomm has underlined SoundHound’s strategic vision. While navigating a fiercely competitive industry dominated by giants like Amazon, Apple, and Google, SoundHound’s liquidity position stands strong, having eliminated $100 million in debt and concluding the quarter with $201 million in cash reserves.
The Path to Profitability
Like any growth-oriented company, SoundHound is laser-focused on expanding its footprint in the burgeoning voice AI market. While the bottom line is currently in the red, adjusted net losses have dwindled to $0.04 per share in the quarter, down from $0.07 per share a year earlier.
The acquisition of Amelia has prompted SoundHound to revise its revenue forecasts upwards, with projections exceeding $80 million in 2024 and $150 million in 2025.
Analysts are mirroring these optimistic sentiments, foreseeing a 79.9% revenue uplift to $82.5 million in 2024 and an additional 84.2% surge to $152.1 million in 2025. Losses are anticipated to narrow to $0.35 per share in 2024 and $0.21 in 2025, propelling capital markets to evaluate SOUN stock at a premium but justifiable 21.5x forward 2024 estimated sales.
Embracing a growth strategy emphasizing expanding its clientele, enhancing technology, and international market penetration, SoundHound stands poised to reap the rewards in the years ahead. Innovating new features and capabilities for its Houndify platform also sets the stage for increased revenue streams.
With the global speech and voice recognition market forecasted to reach $84.9 billion by 2032, SoundHound is strategically positioned to capitalize on this anticipated growth.
Wall Street’s Resounding Applause for SoundHound AI
Following SoundHound’s stellar Q2 results, analysts at D.A. Davidson and Wedbush reaffirmed a bullish “buy” rating on the stock, with price targets reflecting confidence in its potential.
H.C. Wainwright analyst Scott Buck’s optimistic outlook on SOUN, underscored by the company’s strong Q2 performance and burgeoning backlog, reflects a promising future despite the current lack of profitability.
Collectively, the Wall Street choir sings praises for SoundHound AI, branding SOUN stock as a “strong buy” with lofty expectations. Analyzing the average target price of $7.58, investors could potentially revel in another 53.1% surge from current levels, with the highest price estimate hinting at a staggering 91.9% rally in the next 12 months.
