The past few years have been like a roller coaster. Soundhound AI (Thorn 6.45%) investors. The stock made its debut with much fanfare in early 2022 through a special acquisition purpose company (SPAC), soaring more than 100% in its first week after going public. But the other shoe quickly fell, with the stock losing more than three-quarters of its value in the months that followed.
But the excitement around artificial intelligence (AI) and SoundHound’s potential to revolutionize voice AI services has sent the stock soaring, up 286% so far this year (as of this writing).
There’s more to this company than meets the eye, and there’s a lot going on behind the scenes. Let’s dive into the three things he says smart investors know about SoundHound AI.
Image source: Getty Images.
Nvidia’s investment isn’t what it seems
SoundHound AI has been under fire since mid-February. The spark that sparked this fire was Nvidia (NVDA -0.12%) As a result, the investment in SoundHound was revealed. Investors took this as his seal of approval for Nvidia, and the stock rose 80% in one day.
It may seem like a big deal, but the devil is in the details. Nvidia’s 1.73 million shares represent less than 1% of SoundHound’s total stock count of approximately 247 million shares, so it cannot be called a large-scale investment. Additionally, a little digging reveals that Nvidia invested in his SoundHound back in 2017 when it was still a startup. So perhaps the investment is not recent.
Don’t get me wrong. The fact that Nvidia invested in SoundHound definitely represents a vote of confidence, but it’s not like the stock was worth doubling over the past month.
attract some famous customers
SoundHound AI’s voice recognition software is currently focused on the restaurant and automotive industries, and the company has had some major successes recently.
Late last year, SoundHound signed a deal with fast-food chain White Castle to create voice-enabled drive-thru menu boards that allow customers to order without interacting with staff. As a result, orders are processed in less than 60 seconds on average and his order completion rate is 90%, exceeding previous staff-based benchmarks.
The company debuted similar technology in collaboration with Jersey Mike’s Subs to offer customers phone-based pickup orders. The initial test will involve 50 stores, but could eventually expand to more than 3,000 Jersey Mike’s stores.
Just last month, SoundHound AI announced that after a successful pilot, its generative AI-powered assistant, Iris, will be integrated into the entire range of Stellantis vehicles across Europe and available in 13 languages in 18 countries. Announced. The system allows vehicle occupants to make phone calls, plan trips, open the sunroof, check sports scores, and perform other voice-activated tasks.
These customer acquisitions could lead to adoption by other big-name restaurants and car manufacturers. But time will tell.
Large and growing backlog
These large contract wins were evident in SoundHound’s fourth quarter results. Revenue was $17.1 million, an 80% increase year-over-year, and loss per share was cut in half to $0.07. Most notably, the company’s backlog nearly doubled to $661 million. This is a forward-looking indicator, so you can see that SoundHound is building on the future of sound.
Management expects SoundHound’s growth to continue. The company projects for him $70 million in revenue in 2024, at the midpoint of guidance, which would represent 53% growth for him. SoundHound projects revenue to grow $100 million, or 43%, in 2025 while achieving positive adjusted EBITDA.
Should you buy SoundHound AI stock now?
Based on recent developments, SoundHound AI certainly has a lot to offer. That being said, investors should still approach this stock with caution, especially considering he has gained over 300% over the past year (as of this writing). As a result, the company’s stock is currently selling for 25 times next year’s sales, a frothy valuation for a company that is not yet profitable.
That’s not to say investors should avoid SoundHound AI entirely. Rather, stocks are risky, and any position is only a small part of a diversified portfolio.
