Why analysts are optimistic about SoundHound’s long-term growth potential

passion all around SoundHound AI, Inc. (SOUN) You can tell by touching it. With solid revenue growth and strategic partnerships highlighting long-term potential, the stock has garnered tremendous interest among investors. In this article, we will evaluate why analysts are optimistic about SOUN’s growth prospects.

SoundHound is at the forefront of voice-based conversational AI technology, providing solutions that enable seamless interactions across multiple languages. AI systems are deployed in a variety of fields, including customer service call centers, restaurant ordering platforms, and automotive systems. With a market capitalization of $1.62 billion, SOUN falls into the mid-cap category, making it an attractive option for investors seeking growth opportunities in the AI ​​sector.

SOUN’s stock price has performed exceptionally, up nearly 150% year-to-date and over 135% over the past three months. Isn’t it great? Moreover, despite the recent decline, the stock is comfortably above its 200-day moving average of $3.05, indicating an upward trend.

SoundHound’s Strategic Partnerships and Acquisitions

May 9, SOUN Partnering with Perplexity, a conversational AI-based answer engine. This partnership focuses on integrating online Large Language Models (LLMs) to enhance voice assistant capabilities across multiple devices such as cars and IoT devices, making it the most advanced voice assistant on the market.

Additionally, the company announced previously announced closure Acquisition of SYNQ3 Restaurant Solutions Became the largest U.S. voice AI provider for restaurants in the March quarter

Remarkably, the restaurant segment now accounts for around 30% of the company’s total revenue, significantly exceeding initial forecasts set for FY24.

Additionally, SoundHound has partnered with major brands such as Applebee’s and Church’s Chicken to expand its market presence and revenue streams. The company also signed an agreement with a leading Asian electric vehicle manufacturer later this year to integrate its voice assistant technology into the major U.S.-based EV manufacturer’s entire vehicle lineup.

SOUN’s partnership landscape remains vibrant, as evidenced by recent collaborations with: NVIDIA Corporation (NVDA) March 18, 2024. Accordingly tandemThe company will offer in-vehicle voice-assisted generated AI responses that work seamlessly without connectivity.

Driven by these advancements, SOUN has seen a surge in demand for its voice AI solutions across the automotive and restaurant sectors. By securing key brand partnerships, the company is accelerating its growth trajectory and solidifying its position in the highly competitive conversational AI market.

Strong financial performance and growth prospects

SOUN for the first quarter ended March 31, 2024 Strong external performance, revenue rose 73% year-over-year to $11.59 million, beating analysts’ expectations of $10.1 million. The company’s three-pillar strategy focused on AI for customer service, in-vehicle systems, and IoT devices has accelerated performance with notable expansion of drive-thru AI services and smart ordering services.

The company’s non-GAAP profit increased 56.8% year over year to $7.59 million. Meanwhile, cumulative subscription and reservation balances increased 80% to $682 million, driven by strong product royalties and a strong automotive segment. Additionally, annual query execution rates increased 60% year over year, reaching over 4 billion in the first quarter.

“Voice AI is quickly becoming essential to customer service, as evidenced by growing subscription demand,” said Keyvan Mohajer, CEO and co-founder of SoundHound AI.

Ultimately, however, the company continued to struggle with profitability and reported a non-GAAP net loss of $19.88 million, or $0.07 per share, along with an adjusted EBITDA loss of $15.4 million.

Despite these challenges, SOUN raised its full-year revenue guidance (lower), projecting a range of $65 million to $77 million. The company also aims to achieve adjusted EBITDA profitability by 2025, which the company expects to drive further growth. Sales exceed $100 million (More than double the $45.9 million reported in 2023).

Mixed analyst expectations

The Street expects SOUN to generate revenue of $13.75 million in the second quarter (ending June 2024), a 57.1% year-over-year increase. However, the company is expected to report a loss of $0.08 per share for the current quarter.

Additionally, analysts expect revenue to surge 53.7% and 45.6% year-over-year in fiscal 2024 and 2025, reaching $70.52 million and $103.35 million, respectively. However, earnings per share are expected to remain in negative territory for at least the next two years.

Additionally, the company has topped consensus revenue estimates in three of the four subsequent quarters, suggesting its growth trajectory is likely to continue in future quarters.

conclusion

SOUN’s first quarter sets the tone for 2024, another solid year of growth for the company. The growing need for voice AI in customer service is driving demand for subscription services. Leveraging over 20 years of technological innovation and billions of customer interactions, SoundHound is an AI company that excels at delivering the best voice AI technology on the market.

Across automotive and customer service, renowned global brands look to us for an unparalleled experience.

Wedbush analyst Daniel Ives reaffirms his “outperform” rating on SOUN. Price prediction: $9. The company continues to see strong demand for its voice AI products in the automotive and restaurant segments, the analyst said after its first quarter results. This growth has been achieved by securing key brand partnerships to gain market share in the conversational AI market.

Additionally, analysts at Cantor Fitzgerald said: SOUN stock upgraded to ‘neutral’ From “underweight”. In a separate development, Cantor Fitzgerald analyst Brett Knoblauch upgraded the stock from sell to hold.

Growing interest in AI technology shows potential for growth, but it is currently struggling with profitability issues. SOUN’s trailing 12-month EBITDA margin, net income margin, and leveraged FCF margin were negative 125.2%, negative 186.2%, and negative 58.2%, respectively, compared to industry averages of 9.82%, 2.48%, and 10.05%.

Looking at valuation, it appears that the company is trading at a premium compared to its peers. SOUN’s future EV/sales is 23.05 times, which is 715.4% higher than the industry average of 2.83 times. Likewise, on a futures price/sales basis, the stock is trading at 24.74x, which is higher than the industry average of 2.88x.

Nonetheless, SoundHound AI’s intrinsic value lies in its technological advancements and market positioning, particularly in the field of conversational AI technology.

Taking these factors into account, SOUN presents a potentially highly profitable but highly volatile investment profile. Therefore, investors should carefully monitor future earnings reports and company developments before making any investment decisions.