In the dynamic world of artificial intelligence (AI) stocks, one player is capturing Wall Street’s attention with the potential to double its value over the next 12 months. SoundHound AI, a developer of conversational AI technology, has emerged as a contender in the AI arena. In this article, we delve into the roller-coaster journey of SoundHound AI’s stock and the factors contributing to its optimistic outlook.
Addressing AI doomsday fears
The rise of AI has generated both excitement and apprehension. While doomsday scenarios of AI taking over the world abound, billionaire investor Marc Andreessen has argued that these fears are largely exaggerated. SoundHound AI aligns with this perspective, positioning itself as a valuable contributor to the AI landscape.
SoundHound AI specializes in developing conversational AI technology, with its voice AI platform finding applications in a wide array of products that interact with end users. Notably, SoundHound boasts an impressive clientele, including major automakers such as Honda, Hyundai, and Stellantis, as well as tech giants like Qualcomm, Oracle, and Block’s Square. The company’s technology is even employed by restaurant chains such as Beef O’Brady’s, Crust Pizza, and White Castle.
A year of roller-Coaster rides
The journey of SoundHound AI’s stock in 2023 has been nothing short of a roller-coaster ride. At the outset of the year, the stock experienced a sharp drop of approximately 40%. However, by early February, it had rebounded impressively, registering a 160% increase. Yet, just six weeks later, the stock retraced all those gains. The volatility continued, with peaks and valleys marking its progress. Despite these ups and downs, SoundHound AI’s share price has managed to maintain a year-to-date increase of nearly 35%.
Wall Street’s confidence in SoundHound AI
Despite the stock’s volatility, Wall Street analysts remain remarkably bullish about SoundHound AI. While only three analysts currently cover the company, all three unanimously recommend it as a buy, with one analyst going further to rate it as a strong buy. What truly underscores Wall Street’s confidence are the 12-month price targets attached to these buy recommendations. On average, these targets suggest a potential upside of more than 100% from the current share price.
It’s worth noting that averages can sometimes be influenced by outlier data points. In SoundHound AI’s case, an exceptionally optimistic price target, nearly 190% higher than the current share price, has a significant impact on the average. However, even the most conservative price target implies an upside potential of over 65%, emphasizing Wall Street’s overall optimism.
Evaluating SoundHound AI’s prospects
While Wall Street exudes confidence in SoundHound AI, investors must consider certain areas of concern. The company continues to operate at a loss, reporting a net loss of almost $22 million in the second quarter and negative adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $9.9 million.
Additionally, SoundHound AI faces formidable competition from tech giants like Amazon and Microsoft, who possess substantial resources for research and development. The company’s valuation, trading at 14 times trailing 12-month sales, is notably higher than some of its AI peers.
However, the analysts’ optimism is not without merit. SoundHound AI has exhibited promising signs, with a growing bottom line, robust sales growth (up 42% year over year in Q2), and differentiated technology that sets it apart from competitors.
The SoundHound AI investment proposition
SoundHound AI is not a stock for the risk-averse. Its shares are expected to remain highly volatile, and the company is not yet profitable. However, for investors with an appetite for risk, SoundHound AI presents an opportunity worth considering. While the notion of the stock doubling within a year is met with skepticism by some, it has the potential to deliver returns that outperform the market.
In conclusion, SoundHound AI’s roller-coaster journey in 2023 may have left investors on edge, but Wall Street remains steadfast in its bullish outlook. As AI technology continues to evolve, SoundHound AI positions itself as a contender with the potential for significant growth. Investors should proceed with caution but not dismiss the intriguing prospects that SoundHound AI brings to the AI landscape.
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