$SOUN: AI-Sound Investment for the Future?
I swear that I felt like I was doing an ala Ms Cathie Wood when I decided to share this post.
Why the “weird” sentiments:
Firstly, unsure how reactive readers will be, over a “potential” AI stocks.
More importantly, I feel that by sharing, it’s almost like I am endorsing it - just like what Ms Wood would shamelessly do.
So, I emphasize again, this is strictly a sharing post.
Whether it is compelling an investment, everyone needs to further their own due diligence.
Background.
I first noticed $SoundHound AI Inc(SOUN)$ in a post revealing $NVIDIA Corp(NVDA)$ 13F filing that consisted new purchases including SOUN and 2 other companies. (see below)
I made a conscious effort not to read about it because I had other stocks on my radar.
When it comes to investing, I am learning (slowly albeit surely) that I need to follow my game plan, march to my own beat & rhythm and not anyone’s else’s.
Six Weeks on !
Fast forward 6 weeks later (that’s a lot of US trading times in US market) I crossed path with SOUN again.
With “nothing pressing” this time, I decided to examine SOUN and see where it could take me.
Afterall, even current IT giants $Alphabet(GOOG)$, $Microsoft(MSFT)$ and $Apple(AAPL)$ — they all had humble beginnings.
Why not SOUN?
I am sharing a post from InvestorPlace. (see above)
SoundHound AI (SOUN) is a volatile stock, on an overall uptrend.
It is an interesting company with strong revenue growth.
It is also, a notable short seller - Capybara Research’s target.
SOUN occupies a specific niche in the AI technology space.
Specifically, the company product is a “voice AI solution” that let businesses offer incredible conversational experiences to their customers.
Core Business Bases.
SoundHound AI's platform (Houndify) has secured customers in two main sectors.
(1) Automotive industry.
SOUN made the most progress selling into this industry.
It has relationships with over 20 auto brands, including (a) Honda, (b) Jeep, (c) Hyundai, (d) Fiat, (e) Chrysler, and (f) RAM, among others.
In Q4 2023 it won a deal with a Stellantis to install Houndify in its vehicle, significantly increasing its unit volumes through 2037.
(2) Food & Beverage Industry.
SOUN has also been making big strides in the quick-service restaurant vertical.
Its AI voice assistant app will take phone orders, so employees do not need to answer calls and focus on helping customers instead.
It also has solutions for drive-thrus and kiosks.
Clients include White Castle, Jersey Mike's (quick service chains eateries), among others.
SOUN has also signed deals with restaurant-focused fintech companies such as Toast and Olo.
Gil Luria, Analyst - DA Davidson has:
Reiterated a “Buy” rating.
Hiked its price target from $7.50 to $9.50.
Although the revision is encouraging, not everyone is a big fan of it.
SoundHound AI
SOUN has been rising from mid-February 2024 onwards. (see above)
However, its extreme peaks & troughs movements might shake out some investors.
YTD, this stock has move from less than $2 to $9 and then back to the $6 region.
SOUN’s volatility makes Luria’s $9.50 price target seem possible.
It also means that SOUN could decline to a much lower price point as well.
How much lower?
Two reports from Capybara Research, acknowledged its short position in the sound AI stock.
Its report said share price could fall to $1.00 per share.
Capybara’s main criticism about SOUN “(a) it is losing money and (b) no clear path to profitability.”
Facts and Supporter.
(1) 2023 Quarterly earnings.
In Q4 2023, SOUN generated $17.1 million in revenue.
It was a +80% gain YoY.
Gross margin improved by +6% YOY to 77%.
For Q4 2023, it reported a net earnings loss of -$0.07 per share versus a net loss of $0.15 per share YoY.
Last but not least, SOUN is trading at an over 26x price-to-sales (P/S) ratio.
With the company still in the “red”, SOUN is “speculative” currently.
(2) 2024 Outlook (and beyond).
For FY 2024, its forecast revenue is between $63 million & $77 million.
At midpoint, it will be nearly +53% growth, YoY.
For FY 2025, SOUN said it’s looking for revenue to exceed $100 million.
However, it is SoundHound AI’s $661 million in future revenue, awaiting to be collected, that is interesting!
These are subscriptions and bookings SOUN already have agreements for.
Most of the agreement’s money should come in by end 2031, with some contracts lasting even longer.
(3) SOUN’s backer.
Reportedly, AI-leader Nvidia owns approximately 3.7 million shares of SOUN (approx. 0.6% of the company).
In addition to Nvidia being a “backer”, it is also a partner-collaborator offering an innovative, generative-AI-enabled in-vehicle voice platform.
Anymore “doubts” about SoundHound AI Inc?
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Do you think that AI-application related stocks will boom in the aftermath?
Do you think SoundHound AI Inc will be a “leader” of its own; just like its backer Nvidia?
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It’s hard to predict. AI stocks seem to hot to invest now
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Let's see how she perform in the long run
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