Title: Should You Buy SoundHound AI's Stock Today?
Title: Should You Buy SoundHound AI's Stock Today?
SoundHound's Ascent in the AI Market
SoundHound AI (SOUN 10.04%), steadily soaring in the AI sector, boasts a conversational AI platform that empowers businesses to offer services ranging from voice-enabled dining at Chipotle to in-vehicle commands for Stellantis' automotive brands. With over 200 clients on board, the company's share price has skyrocketed over 500% in the past year.
However, some investors may wonder if SoundHound AI's stock is a suitable purchase in the current market climate. Let's delve deeper to explore the pros and cons of investing in this AI powerhouse.
SoundHound's Accelerating Growth
Investors have been enticed by SoundHound's impressive growth, as evidenced by its third-quarter results (ending Sept. 30). Revenue surged 89% to $25.1 million, and the company is anticipating revenue of $165 million at the midpoint for 2025, nearly doubling its 2024 projected sales of $83.5 million.
Additionally, SoundHound has strengthened its revenue mix by reducing its reliance on a few major clients. Competing giants account for just 12% of sales, down from 72% in the previous year, creating a more resilient business model.
Moreover, SoundHound has diversified its customer base. Previously, the auto industry was its primary source of revenue (90%), but now, its business is balanced across several industries, including financial services, healthcare, insurance, and restaurants (contributing 5% to 25% of sales each).
Investors' Considerations
Despite the company's impressive revenue diversification and growth in less than a year, some factors should be taken into account by potential investors.
Non-GAAP Profitability
Although SoundHound improved its non-GAAP (generally accepted accounting principles) net loss from $0.06 in the previous quarter to $0.04 in the third quarter, the company remains unprofitable. Analysts predict losses of $0.24 per share for 2024, followed by a narrowing to $0.17 in 2025.
Valuation
SoundHound's share price currently trades at 64.8 times forward sales, significantly exceeding the S&P 500's price-to-sales ratio of 3.1.
Verdict: Tread Cautiously with SoundHound AI
SoundHound AI's stock appears to be overvalued, though it could still have room to grow due to AI market trends. If considering an investment in SoundHound, it may be prudent to wait for a stock price correction before committing. In such a case, allocating a smaller portion of your portfolio to SoundHound might be advisable.
As always, conducting thorough research and risk assessment is crucial when making investment decisions.
Investors considering SoundHound AI as an investment opportunity might be interested in exploring potential avenues for diverting some of their funds into the company's stock. With a robust finance strategy and a focus on expanding its platform's capabilities, SoundHound could potentially generate significant returns in the long term.
Moreover, SoundHound's commitment to investing in research and development in the AI sector could provide a unique opportunity for investors looking to diversify their portfolio in technology stocks. By focusing on AI, SoundHound positions itself as a key player in the future of finance, making it an attractive prospect for forward-thinking investors.