SoundHound AI (NASDAQ:SOUN) shares enjoyed a blistering run toward the end of last year, soaring by more than 375% across November and December. But as is often the case, what goes up at such a rapid pace, will often come down just as violently. To wit, so far in 2025, the stock has shed 52.5%.
So, could now be the right time to pick up shares on the cheap? Cantor analyst Thomas Blakey thinks the voice recognition specialist has plenty going for it.
The company is a leading provider of conversational AI software, specializing in its speech-to-meaning Voice AI platform. This tech enables real-time speech-to-text conversion by integrating proprietary automatic speech recognition (ASR) with natural language understanding (NLU). The company’s solutions are used in various applications, including automotive systems, smart devices like TVs, contact center as a service (CCaaS) platforms, and quick service restaurant (QSR) ordering systems and hardware. In its most recent quarterly update (3Q24), the company reported a 100% year-over-year increase in annualized user queries, in turn surpassing six billion.
SOUN’s business model consists of roughly one-third royalties, with a focus on the automotive segment (including companies like Stellantis and Mercedes, amongst others), which it considers its Pillar One. Through the acquisition of Amelia, Pillar Two, its Subscription Services, accounted for about two-thirds of the company’s revenue in C24. Pillar Three is still in its early stages and presents “unique monetization opportunities,” where SoundHound AI shares in transaction revenues and advertising from customers (such as QSRs) via its technology platform, which is integrated into devices like smart TVs, automobiles, and more.
It’s a value proposition that has Blakey singing the company’s praises. “We are impressed with SoundHound AI’s technology and all demos we’ve seen are impressive,” the analyst said. “From in-auto ordering to QSR kiosk ordering from cloud-based solutions to edge based (e.g., Nvidia (former shareholder) powered edge devices) solutions, the company’s Voice AI technology works better than any we have tested.”
The company also has “multiple pathways to growth,” including its Subscription-based Amelia acquisition, which is centered on voice-enabled workflow automation. Additionally, there are significant opportunities in contextual search-related commerce and advertising revenue sharing.
But down to the nitty-gritty, does that all make SOUN shares a Buy? Not quite, as even after the big pullback, Blakey thinks the shares look pricey. “At 20x EV/C26 revenue we feel these scenarios are embedded in shares at current levels,” the analyst said. Accordingly, Blakey assumed coverage of the stock with a Neutral rating and $10 price target. There’s potential upside of 8% from current levels. (To watch Blakey’s track record, click here)
One more analyst joins Blakey on the sidelines here and with an additional 2 Buys, the stock claims a Moderate Buy consensus rating. The average target is an optimistic one; at $16.5, the figure makes room for 12-month returns of 78%. (See SOUN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.