Artificial intelligence (AI) has been a game-changer, driving the success of multiple tech companies, and Soundhound AI, Inc. (SOUN) is a prime example of this trend. The company has captured massive investor attention over the last year with its aggressive acquisition strategy and expanding AI solutions within the speech and voice recognition market.
The spotlight intensified earlier this year when chip giant Nvidia Corporation's (NVDA) inaugural February 13-F filing disclosed a roughly $3.7 million stake in SOUN, sparking a dramatic surge in the company’s shares. But this wasn’t Soundhound’s first time attracting investment from Nvidia.
Nvidia’s backing of Soundhound runs deep. From a $75 million venture investment in 2017 to its pivotal role as a strategic investor when SOUN debuted via a special purpose acquisition company (SPAC) in 2022, Nvidia has been a steadfast ally, highlighting the chip giant’s continued confidence in Soundhound’s future.
As Soundhound's role in the AI revolution gains momentum, the stock is once again back in the spotlight this month, fueled by a recent acquisition and strong Q2 earnings. Following a steep pullback from its March highs of $10.25, the buzz around this “transformative” deal has market watchers excited about the company’s potential. Is this an opportune time to scoop up the stock while it's still trading under $10?
About Soundhound AI Stock
California-based Soundhound AI, Inc. (SOUN) is revolutionizing conversational intelligence with its cutting-edge voice AI technology. Known for its lightning-fast and highly accurate solutions in multiple languages, Soundhound transforms user experiences across industries like automotive, TV, and customer service. Its innovative products, including Smart Answering, Smart Ordering, and Dynamic Drive Thru, fuel seamless interactions, while SoundHound Chat AI integrates generative AI for advanced voice assistance.
With a market cap of roughly $1.6 billion, this sound recognition and voice assistant technology company has wooed investors with its impressive potential. Shares of Soundhound have rallied a stunning 104.6% over the past 52 weeks and 130.6% on a YTD basis, smashing the broader S&P 500 Index’s ($SPX) gains of 24.9% over the past 52 weeks and 16.2% on a YTD basis.
Even after a 52% pullback from its annual highs, SOUN stock is still valued at a lofty 35.7 times sales. As with many other AI-fueled plays, this indicates that investors are paying a premium for expected future sales growth.
Soundhound Takes Off on Q2 Earnings, Amelia Acquisition
Shares of Soundhound shot up more than 21% on Aug. 8 after the sound recognition company revealed its better-than-expected Q2 earnings results alongside its acquisition of Amelia, an enterprise AI software company.
With this acquisition, Soundhound is poised to elevate its conversational AI capabilities. The $80 million deal, which includes cash, equity, and the assumption of Amelia’s debt, positions Soundhound to capitalize on Amelia’s advanced customer service, employee assistance solutions, and extensive industry reach, spanning financial services to healthcare.
Plus, considering Amelia’s $160 million in cash and $39 million in debt, the deal appears financially favorable for Soundhound.
During Q2, Soundhound generated $13.5 million in revenue, a notable 54% year-over-year jump, fueled by elevated demand for voice and conversational AI. Gross margin for the quarter stood at 63%.
While the company hasn’t been able to achieve profitability yet, its adjusted loss per share of $0.04 in Q2 marked an improvement from the adjusted loss per share of $0.07 recorded in the year-ago quarter. SoundHound concluded the quarter with a strong cash reserve of $201 million, highlighting its solid financial position amid ongoing growth.
With the addition of Amelia’s recurring revenue, Soundhound boosted its revenue outlook for fiscal 2024 and fiscal 2025. The company now expects to exceed $80 million in revenue for fiscal 2024.
Looking ahead to fiscal 2025, revenue is projected to nearly double, surpassing $150 million, thanks to the substantial boost from Amelia’s income streams and expanded market opportunities.
Analysts tracking Soundhound project the company’s loss to narrow by 21.1% year over year in fiscal 2024 and shrink another 40% in fiscal 2025.
What Do Analysts Expect for Soundhound Stock?
Soundhound’s announcement of its strategic acquisition of Amelia has fueled excitement on Wall Street, prompting Cantor Fitzgerald to upgrade SOUN stock to “Overweight” from “Neutral” with a new price target of $7, which suggests 41.4% upside potential from current levels.
In a note, analyst Brett Knoblauch highlighted the deal's “transformative” potential, saying that it will accelerate Soundhound's entry into financial services and healthcare markets that would have taken years to penetrate otherwise. "In other words, a purchase multiple of ~4.5x for a company that has meaningful recurring revenue and is operating across very synergistic end markets," Knoblauch highlighted.
Overall, SOUN stock has a consensus "Strong Buy" rating. Out of six analysts offering recommendations for the stock, five advocate a "Strong Buy," and the remaining one suggests a "Hold."
Wall Street's enthusiasm for Soundhound has grown in recent weeks, with the number of "Strong Buy" recommendations rising from four to five, reflecting increased confidence in the company's prospects.
The average analyst price target of $7.58 indicates a solid 53% upside potential from current levels. The Street-high target price of $9.50 suggests that SOUN could rally as much as 91.9% from here.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
