Shares of SoundHound AI ( SOUN 1.70% ) In the previous year, this small-cap company has outperformed the overall market by achieving impressive gains of nearly 170%, despite experiencing significant fluctuations. Investors have been enthusiastically purchasing shares of this company to capitalize on the increasing need for AI solutions that are voice-activated.
However, the stock of SoundHound experienced significant growth earlier this year. Nvidia disclosed a minor share The company has established a strong presence in the voice AI market, despite being relatively small. However, investors may be wondering whether they should hold onto the stock in hopes of further gains in the coming year, despite its high valuation. valuation ?
Let’s discover.
The recent findings from SoundHound AI indicate that its fast expansion is capable of being maintained in the long term.
SoundHound announced its financial performance for the second quarter on August 8th. Revenue increased by 54% compared to the previous year, reaching $13.5 million, surpassing the expected $13.1 million. The adjusted loss per share decreased to $0.04 from $0.07 in the corresponding quarter of the previous year.
The company provides voice solutions utilized by businesses in customer service sectors like restaurant orders, as well as by car manufacturers for development purposes. chatbots There was a significant increase in demand for conversational AI assistants in the last quarter. SoundHound’s Chat AI voice assistant is now being used by six different automaker brands. Stellantis .
A United States electric vehicle (EV) maker will soon begin implementing SoundHound’s voice assistant throughout all its vehicles. The company is also expanding its presence with car manufacturers in Latin America and Europe, as well as partnering with different restaurants and food delivery services.
This is the reason why the company’s revenue pipeline grew at a quicker rate than its overall revenue in the previous quarter. By the end of the period, it had accumulated a backlog of subscriptions and bookings totaling $723 million, which was nearly twice the amount from the previous year. The bookings backlog consists of customer contracts that have been confirmed, while the subscriptions backlog represents the revenue that could be generated from existing customers.
This metric contains a level of uncertainty as there is a possibility of contract cancellations and potential failure to reach the expected revenue from existing customers in the future. However, the company emphasizes that it uses “reasonable assumptions about adoption percentages” when determining the backlog metric.
SoundHound’s expansion indicates its capability to turn its promising pipeline into tangible revenue. Additionally, the company is looking to enhance its position in the voice AI industry by purchasing Amelia for $80 million. This acquisition aims to bolster its customer service offerings and broaden its reach across various sectors such as insurance, healthcare, retail, and financial services.
Management announced that Amelia will begin making a positive impact on the company’s growth in the latter half of 2024. Furthermore, the company anticipates generating over $80 million in revenue this year, surpassing the previous forecast of $65 million to $77 million. In 2025, SoundHound projects sales to surpass $150 million, with Amelia alone contributing $45 million in recurring revenue.
This suggests that the stock may continue to be a strong investment option in the upcoming year.
Analysts anticipate further growth in the coming 12 months.
Six analysts who follow SoundHound have predicted a median 12-month target stock price of $7.00, which represents a 36% increase from the current level. Out of the six analysts, five recommend buying the stock, while one suggests holding it. The company’s recent performance suggests that it may meet or exceed these expectations in the upcoming year.
Investors should be aware that SoundHound’s stock is currently trading at a high valuation of 26 times its sales after experiencing a strong increase in the past year. Additionally, the company has not achieved profitability yet. Therefore, individuals interested in investing in this stock should consider these factors. AI stock Investors looking to add these assets to their investment portfolios should be ready to pay a high price.
SoundHound’s remarkable expansion could assist in justifying its higher price, particularly with the upcoming acquisition of Amelia. Investors seeking growth opportunities and willing to take on more risk may want to keep an eye on it for potential further gains.
