1 AI Stock Analysts Are Very Bullish On

The word is definitely out about AI stocks, but that hasn’t stopped investors from searching for the next big thing.  SoundHound AI (NASDAQ: SOUN) may just be one of those companies that can deliver.

The company has continued to build its client list for its voice recognition software, and as a result, the AI player saw its revenue grow 52% compared to last quarter. That incredible feat has been reflected in the stock price with SOUN share price soaring by over 70% last year.

While SoundHound software has many applications, it has found most success in the restaurant and automotive industries. Restaurant chains use the company’s voice recognition software to take orders, automate production, and manage reservations. On the automotive side, SoundHound hands-free applications keep drivers better informed behind the wheel.

So is SoundHound stock a buy?

What Made SoundHound AI Stock Increase?

SoundHound reported $13.3 million in sales in the 3rd quarter of 2023, a 19% increase from the same quarter of 2022. The company also beat revenue expectations by nearly 4%. SoundHound delivered impressive gross margins too of 73% in the 3rd quarter.

While the company did suffer a $20.2 million net loss, it was right in line with analysts’ expectations. And the loss was a 33% improvement over the net loss of $30 million in the same quarter of 2022. The per share loss came out to $0.09 versus $0.15 the year prior.

The AI developer is increasing revenues and shrinking losses, and there has also been plenty of good news for SoundHound over the last few months. The company’s Chat AI product has now been integrated into DS vehicles (a brand owned by Stellantis) in Europe. Drivers can get navigation tips, restaurant recommendations, weather data, and more as they cruise. That deal makes SoundHound the first generative AI voice solution for vehicles in Europe.

And the company has continued to innovate on the restaurant side of its portfolio. SoundHound negotiated deals with Krispy Kreme and Jersey Mike’s in the 3rd quarter. Those partnerships will put SoundHound AI at the forefront of those companies’ in-store ordering operations.

Will SoundHound Stock Keep Going Up?

Revenue growth and new partnerships drove the stock up in 2023, but can the good news keep coming in 2024?

All signs point to yes. The company reiterated its guidance for the 4th quarter, expecting $16-$18 million in revenue for the quarter. And it also expects to have a positive adjusted EBITDA in the quarter. That’s an important step toward profitability, and it should keep SOUN on a positive trajectory.

On the automotive end, the company already has agreements with Honda, Kia, and Hyundai, plus it integrates with Qualcomm’s Snapdragon processors. SoundHound will also connect its voice software into vehicles made by Turkish automaker Togg.

The company’s long list of restaurant partnerships now includes the White Castle fast food chain. In the 3rd quarter, SoundHound announced a collaboration with Samsung to automate drive-thrus at White Castle restaurants. SoundHound’s vocal recognition software will pair with Samsung’s digital signage to create a fully interactive ordering experience.

The company’s quest for a niche in the restaurant industry reached an important milestone in recent weeks. In December, SoundHound announced the $25 million acquisition of SYNQ3 Restaurant Solutions. When the deal closes in early 2024, Soundhound should be the leading voice AI provider for the restaurant industry.

Is SoundHound Stock Undervalued?

SoundHoud is 135% undervalued according to 5 analysts who have a consensus price target of $4.52 per share.

While the company appears to be finding its footing, SOUN has only been on the market since April 2022, after it went public via a SPAC transaction. Its nascency coupled with early volatility, means that analyst coverage is thin.

Of the five on record, the consensus is strong. They all believe that SoundHound stock is a buy right now, and in a big way. Even the lowest forecast has the stock jumping 61.8% to $3.60 next year.

That’s promising news for investors who are still looking for discounted AI stocks. But all of the gains have also driven up SoundHound’s price-to-sales ratio. Now trading at nearly 14x sales, the stock must grow into its projections to justify the premium.

Nonetheless, there is cause for optimism that SOUN is trading well below its 52-week high of $5.11. And the stock traded above $4 in both February and June of 2023, meaning the big gains the analysts forecasted are not unreasonable expectations.

Is SoundHound AI Stock a Buy or Sell?

With a solid customer base that’s constantly building, the future looks bright for SoundHound. There don’t appear to be any immediate threats to the company’s twin niches in the restaurant and auto industries. SoundHound expects continued revenue growth leading to optimism that it will turn profitable in early 2024.

Until then, SoundHound has $110 million in cash to keep it on the move for now. The main concern for potential SOUN investors is the same concern with many AI stocks, that the big gains are over.

That could be true for SoundHound. But with the stock trading at not even 50% of analysts target level, it looks like this AI company still has plenty of room to boom.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.