After a remarkable 2024 that saw its stock soar up over 750%, SoundHound AI (SOUN) has had a rough start to 2025, witnessing a sell-off in its stock amid a bearish trading backdrop and increased investor expectations. Despite this, the company has ambitious sales targets, with projections to double by 2025. It is expanding into various sectors globally and has signed agreements with major brands worldwide. For example, SoundHound recently unveiled its in-vehicle voice commerce platform and announced the launch of the Lucid Assistant, a voice AI assistant for Lucid (LCID) electric vehicles. The company anticipates continuing its growth trajectory and will need to substantiate the rich valuation it trades at.
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Expanding the Use of Conversational AI
SoundHound is a pioneer in the field of conversational intelligence, providing voice AI solutions. Its services allow businesses to create enriched conversational experiences for their clients. SoundHound’s voice AI, underpinned by proprietary technology, is recognized for its superior speed and precision across multiple languages, making it a prominent choice for product makers in the automotive, TV, and IoT sectors, as well as customer service industries.
SoundHound recently unveiled its first in-vehicle voice commerce platform and launched the Lucid Assistant, a hands-free voice assistant for Lucid electric vehicles. The new platform allows users to make restaurant orders via their car’s infotainment system, while Lucid Assistant offers an intuitive way to control various vehicle functions through speech.
In addition to the automotive industry, SoundHound continues to expand into various sectors, including financial, healthcare, insurance, retail, telecom, hospitality, and travel. The company has signed contracts with seven of the top 20 quick-service restaurant brands globally, expanding its AI restaurant solutions. The company is showcasing several automotive technologies and AI solutions at CES 2025.
Growing Revenue From an Increasingly Diversified Customer Base
The most recently released financial results were for the third quarter. There was substantial revenue growth, with an 89% increase year-over-year to $25.1 million. There was a notable improvement in customer concentration, falling from 72% of revenue attributed to the company’s largest customer to just 12%, suggesting an expanding diversified customer base. The company’s automotive, restaurant, financial services, healthcare, and insurance business accounted for 5%-25% of total revenue. This shows a significant shift from the previous year when over 90% of revenue was solely from the automotive sector.
The company reported a GAAP gross margin of 49% and a non-GAAP gross margin of 60%. However, the GAAP net loss was -$21.8 million, with a non-GAAP net loss of -$15.0 million and an Adjusted EBITDA of -$15.9 million. GAAP and non-GAAP earnings per share showed losses of ($0.06) and ($0.04), respectively.
As of the quarter’s end, the company’s total cash and cash equivalents amount to $136 million.
As part of its business outlook, the company predicts its full-year 2024 revenue will be between $82 and $85 million, and its full-year 2025 revenue will range from $155 to $175 million.
Growth Over Time
The stock has declined roughly 10% year-to-date and trades in the upper half of its 52-week price range of $1.62 – $24.98. The negative price momentum has it trading below the shorter time-frame moving averages, including the 20-day (18.55) moving average. The stock P/S ratio of 90x marks a significant premium to the Information Technology sector average of 3.33x.
Analysts following the company have mostly been constructive on the stock. For instance, H.C. Wainwright analyst Scott Buck has recently increased the price target for the shares from $8 to $26 while maintaining a Buy rating. He notes that despite the stock’s valuation appearing to be driven by optimism in the short term, it is expected to be bolstered by business growth over time. Despite the inflated share price, he sees earnings aligning with the share price in the long run.
SoundHound AI is rated a Moderate Buy overall, based on the recent recommendations of four analysts. Their average price target for SOUN stock is $15.25, representing a potential downside of -15.16% from current levels.
Last Note on SOUN
Despite a rocky start to 2025, SoundHound is set to continue its mission to innovate in the AI sector, offering top-notch voice AI solutions and banking on the versatility of its applications across industries. The company’s increasingly diversified customer base and ambitious projections for revenue growth underscore its potential to continue its upward path. As with any journey, there will be bumps along the road, but the future looks promising for SoundHound as it continues to expand, innovate, and lead the way in voice AI solutions.
