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In 2024, the artificial intelligence (AI) industry has continued to attract significant investment, with global AI funding reaching new heights. Crunchbase reports that AI startups globally raised over $50 billion in 2023, despite a broader venture capital slowdown, and this trend has shown no signs of slowing down in the current year. Major tech giants like Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL) have been pouring billions into AI research, acquisitions, and partnerships.
One such company, SoundHound AI, Inc. (SOUN), has been making waves in the AI penny stock market, fueled by its cutting-edge voice-enabled AI and conversational intelligence technologies. SOUN has already notched a remarkable 182% surge year-to-date, thanks in part to a strategic investment from AI heavyweight Nvidia.
However, SoundHound AI stock just pulled back sharply after the company pushed back its profitability target. While investors were clearly disappointed, at least one high-profile tech analyst sees a particularly bright future for this low-priced AI pick. Here's a closer look at what Wall Street expects from this outperforming penny stock now.
SOUN Misses on Earnings
So, 2024 has been quite the year for SoundHound AI (SOUN). The stock was up 273% on the year at its peak of $7.91 - but in late February, SOUN dropped 18.5% in one session as investors reacted to a quarterly earnings miss.
Even though SoundHound AI reported an 80.5% jump in revenue to $17.15 million, that figure was just short of Wall Street's expected $17.21 million. Likewise, the per-share loss of $0.07 was slightly wider than anticipated. Additionally, SOUN had previously predicted it would achieve positive EBITDA in 4Q of 2023, but - despite improving margins - it has now pushed that milestone back to sometime in 2025.
That said, these kinds of wild price swings are pretty standard not just in the world of penny stocks - but in the universe of AI stocks, too, given Nvidia's massive intraday volatility to end last week. In any event, for those who were riding high on the buzz of Nvidia's multi-million investment in SOUN, the negative earnings reaction was a cold splash of reality, as the company's financials didn't quite live up to the hype.
What's Driving Growth for SoundHound AI?
The future potential of SoundHound AI, despite its recent earnings miss, remains promising. First, their voice AI technology is legit. We're talking about solutions that could shake things up in industries like automotive, consumer electronics, and more. And let's not forget that investment with Nvidia - which, though light on details, indicates the company has the foundations to be a formidable player in AI.
Speaking of integrations, SoundHound AI's voice assistant with integrated ChatGPT has gone into full production with Stellantis DS Automobiles, leading to a huge increase in in-car usage. They've also teamed up with Jersey Mike's to introduce voice AI phone ordering. Not too shabby, right?
And looking ahead, the company is forecasting serious top-line growth. They're projecting their revenue to shoot up by more than half this year, and they're targeting over $100 million in sales by 2025. Pretty ambitious, especially when you consider they've got a backlog of orders worth a whopping $661 million.
What Do Analysts Expect for SoundHound AI Stock?
So, SoundHound AI's stock has been on a wild ride, but analysts seem reasonably upbeat about where it's headed. Chief among those is outspoken AI bull Dan Ives from Wedbush, who backed his optimistic view after earnings.
Specifically, Ives is a fan of SoundHound AI's innovative tech and strategic partnerships, and he thinks their voice recognition and natural language processing skills will be in high demand as more industries start using AI-powered solutions. Ives calls SOUN a “Buy,” and has the Street-high price target of $9 - implying expected upside of 50.5% from Monday's closing price.
Most analysts are also bullish, with 5 “Strong Buy” ratings out of the 6 analysts in coverage, and an average price target of $6.97 representing a premium of 16.5% to current levels.
The Bottom Line on SOUN Stock
Yes, SoundHound AI may be in the throes of a rather volatile stock market journey, but the pros are still betting on a bright future. Of course, investing in a speculative AI penny stock isn't for the faint of heart.
But for those willing to take on the risk, SoundHound AI could be an exciting play in the rapidly evolving world of artificial intelligence. They've got the tech, the partnerships, and the ambition to make some serious noise in the AI space. Just don't go betting the farm on this one - stick to a small stake, keep a cool head, and be sure to balance out these “moonshot” bets with some more conservative picks.
On the date of publication, Ebube Jones did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
