Shares of voice artificial intelligence (AI) platform SoundHound AI, Inc. (SOUN) have rallied by more than 803% over the past year. The buzz around generative AI, continued demand for its products, encouraging financials, and the backing of investors like Nvidia (NVDA) have fueled investors’ confidence in the company. While analysts bullish on the stock see persistent upside in 2025, though not on the same levels as seen last year, others are wary of the stock’s elevated valuation and expect it to retreat from current levels.
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Interestingly, on Tuesday, SoundHound unveiled its first-ever in-vehicle voice commerce platform with a demo at the Consumer Electronics Show (CES) 2025. This new offering allows drivers and passengers to order takeout for pick-up directly from the car’s infotainment system. Despite this news, SoundHound stock fell about 10% yesterday. Investors were disappointed that Nvidia CEO Jensen Huang did not mention SoundHound in his keynote address at the CES trade show despite the chip giant’s investment in the conversational AI specialist.
SoundHound Is Taking the Right Steps to Fuel Continued Growth
SoundHound is gaining traction and is strengthening its business by diversifying into new end markets beyond automotive and restaurants. The diversification is boosting the adoption of the company’s advanced technology across numerous sectors and reducing concentration risk. The company’s largest customer now accounts for only 12% of its overall revenue compared to 72% last year, indicating a broader mix of customers.
Moreover, no single sector now contributes more than 25% of the overall revenue. The company is achieving this diversification through organic growth and strategic acquisitions. For instance, the company recently completed the acquisition of enterprise conversational AI provider Amelia to significantly expand to new verticals such as finance, insurance, and healthcare.
After delivering better-than-expected Q3 2024 results with an 89% revenue growth, SoundHound raised its full-year guidance. It now expects its full-year 2024 revenue in the range of of $82 million to $85 million, with expectations to grow the top line significantly in 2025 to the range of $155 million to $175 million.
Mixed Views on SOUN Stock’s Trajectory
While the demand backdrop for SoundHound looks impressive, Wall Street analysts are currently divided on the stock.
In late December, H.C. Wainwright analyst Scott Buck reiterated a Buy rating on SOUN stock and boosted the price target to $22 from $8. Buck cited several positives for his bullish outlook, including the company’s diversification efforts, recent contracts, and the favorable impact of a lower interest rate environment on small-cap stocks.
However, Ladenburg analyst Glenn G. Mattson downgraded the stock to Hold from Buy following the Q3 results due to “rapid share price gain, coupled with a model that shows significantly higher losses than our previous expectations.”
Is SoundHound Stock a Good Buy?
Overall, Wall Street is cautiously optimistic on SOUN stock, with a Moderate Buy consensus rating based on three Buys and two Hold recommendations. The SOUN average price target of $8.10 implies about 55% downside risk from current levels.
Conclusion
While SoundHound’s prospects look bright in the conversational AI space, the stock’s massive rally points to an elevated valuation that could impact its movement in 2025.
