It’s not all victory laps in the AI space. The hype surrounding AI names has gone through the roof recently, and SoundHound AI (NASDAQ:SOUN) has been one major beneficiary. Once it became known AI lord Nvidia had made an investment in the voice recognition specialist (albeit a relatively modest one), shares went on a huge run and have swelled by 133% year-to-date.
Yet, the euphoria took a hit last week as investors responded tepidly to the company’s latest quarterly report. This lukewarm reception translated into a 33% decline in shares over the subsequent three trading sessions, serving as a sobering reality check.
Driven mainly by auto units, yet to some degree offset by a drop in average prices, revenue reached $17.15 million, amounting to 80.5% year-over-year growth yet falling shy of the consensus estimate by $0.6 million. Cumulative bookings backlog doubled y/y to $661 million, and adjusted EBITDA narrowed from a loss of $18.8 million in the same period last year to a loss of $3.7 million. However, at the bottom-line, EPS of -$0.07 missed the Street’s call by $0.01.
Looking ahead, SoundHound anticipates the full year’s revenue will be in the range between $63 to $77 million. The broad guided range considers factors related to the SYNQ3 acquisition, the extent to which the company will retain revenue from call center services, as well as the timing of significant license fees emerging from the backlog.
In his assessment of the report, Northland’s Michael Latimore, a 5-star analyst rated in the top 2% of the Street’s stock pros, notes that the company has mentioned the demand is robust to the extent that it needs to moderate the onboarding process to ensure high-quality deployments.
Latimore expects the focus to remain on growth, noting, “We anticipate increased investments in restaurant deployment staff, sales and marketing, and research and development for the restaurant vertical, as well as higher general and administrative expenses for financial reporting, and anticipated losses from SYNQ3. SOUN is investing for growth, therefore, we are revising our FY24 EBITDA estimate from ($12.2) million to ($30.4) million.”
For now, however, Latimore stays on the sidelines, rating SOUN as Market Perform (i.e., Neutral), alongside a $5.5 price target. This figure suggests an 11.5% upside from current levels. (To watch Latimore’s track record, click here)
Latimore is currently the lone SOUN skeptic on the Street with the 3 other reviews on file all positive and providing the stock with a Strong Buy consensus rating. The forecast calls for one-year returns of ~48%, considering the average target stands at $7.25. (See SOUN stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
