As the AI revolution has propelled technology markets with explosive growth, SoundHound (SOUN) has emerged at the forefront, harnessing the potential of voice-based AI solutions. The company has seen its stock climb an impressive 308% over the past year, powered by results like the 89.13% year-over-year increase in revenue in Q3 2024 and the recent acquisition of Amelia – an enterprise AI software provider.
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SoundHound’s aggressive growth strategy has it well-positioned to expand its footprint in the customer service industry, where AI adoption is projected to generate annual revenue of $1.38 billion by the end of 2024. SOUN’s management expects the company to reach profitability by the end of 2025 on an adjusted EBITDA basis. The stock sports a rich valuation, indicating the market has already priced in near-term growth expectations, so long-term investors will want to be patient and stay focused on harvesting returns over time.
SoundHound’s Growing List of Partnerships and Awards
SoundHound’s significant growth is primarily due to the strong uptake of its voice AI technology offerings. The company offers automatic speech recognition, natural language understanding, and text-to-speech capabilities among its diverse suite of AI-driven solutions. As a result, SoundHound has attracted a robust clientele across varying industries, including automotive, restaurants, the Internet of Things (IoT), and smart devices. Partnerships with major players such as Hyundai (HYMLF), Stellantis (STLA), Honda (HMC), Kia (KIMTF), Qualcomm (QCOM), Deloitte, Oracle (ORCL), Samsung (SMSN), and Motorola (MSI) are strong evidence of SoundHound’s industry-wide appeal.
The company’s acquisition of enterprise AI software provider Amelia marks its expansion into the customer service domain, a sector where voice-based AI solutions are becoming increasingly sought after. Forecasts predict that AI adoption in this area could surge by nearly 24% annually over the next half-decade, potentially yielding an annual revenue of $1.38 billion by the end of this period. SoundHound projects that this strategic acquisition could result in $155 to $175 million of annual revenue, effectively doubling its current annual outlook and suggesting further growth in 2025.
The company boasts numerous awards, including the “Overall Connected Solution of the Year” at the AutoTech Breakthrough Awards. It has been shortlisted for the Reuters 2024 Automotive D.R.I.V.E Honours for Innovation and is a finalist for the 2025 Automotive News PACE Awards.
SoundHound’s Recent Financial Results & Outlook
The company recently reported results for the third quarter, showing strong financial performance with revenue of $25.1 million, reflecting an 89% year-over-year growth rate while beating analysts’ expectations by $2.06 million. This substantial increase is attributed to heightened demand across a multitude of industries. This indicates a broader mix of customers and a switch toward more stabilized revenue streams – the leading client represented 72% of revenue last year and is now down to 12%.
The firm has also diversified its industry contributions, with sectors like automotive, restaurants, financial services, healthcare, and insurance adding between 5% and 25% of revenue. This is a significant shift from the previous year when over 90% of revenue was auto-dependent.
Non-GAAP gross margins stood at 60%, and non-GAAP earnings per share (EPS) reflected a loss of $0.06, beating consensus projections by $0.01.
Management has revised its forward guidance upwards following reports of triple-digit backlog growth, triggering optimistic forward estimates. The company predicts that revenues will fall within the $82- $85 million range in the full year 2024. Looking further ahead, management anticipates that its revenue for the full year 2025 will be $155-$175 million.
What Is the Price Target for SOUN Shares?
SoundHound’s strong financial performance has been reflected in the market with a 104% rally in the share price over the past 3 months. It trades near the top of its 52-week price range of $1.62 – $10.25 and shows ongoing positive price momentum as it trades above all major moving averages.
However, concerns lie in SOUN’s high valuation – P/S ratio of 42.46x compared to the Application Software industry average of 7.6x, offering little in terms of an investment safety net.
SoundHound is rated a Moderate Buy overall, based on the recommendations of five analysts. The average price target for SOUN stock is $8.10, representing a potential -13.00% downside from current levels.
SoundHound in Summary
SoundHound has taken a leading position with a significant focus on voice-based AI solutions. The company’s commitment to growth positions it favorably in the customer service industry, where AI adoption is anticipated to grow exponentially. While the market has priced in this near-term growth for the stock, it has promising potential for investors willing to take a long-term view.
