Is SoundHound AI Inventory a Purchase Now?

AI SoundHound (NASDAQ:SOUN) is efficiently tapping into the rising synthetic intelligence (AI) market with its conversational AI platform. The corporate’s expertise permits companies to supply companies starting from voice management to Chipotle to voice instructions embedded within the automobile to Stellar“automotive manufacturers.

SoundHound now has greater than 200 corporations utilizing its expertise, and buyers have observed its progress, driving the corporate’s inventory worth up greater than 500% previously yr (as of this writing ).

The inventory’s fast rise might have some buyers questioning if SoundHound AI inventory is price shopping for proper now. Let’s take a more in-depth look to seek out out.

There is a good motive why buyers have been drawn to SoundHound. The corporate’s progress has been spectacular, as evidenced by its third quarter outcomes (ended September 30). Gross sales soared 89% within the quarter to $25.1 million, and administration issued 2025 income steerage of $165 million on the midpoint, or almost double Estimated gross sales for 2024 at $83.5 million.

SoundHound has additionally improved its buyer focus and is now much less reliant on a handful of enormous shoppers for almost all of its income. Solely 12% of gross sales at the moment are attributed to its massive prospects, in comparison with 72% final yr. This can be a more healthy income break up and means SoundHound’s enterprise could be much less affected by the departure of 1 or two large shoppers.

It has additionally diversified the kinds of shoppers it has. Final yr, 90% of its gross sales got here from prospects within the automotive business. Now, the corporate’s income is extra evenly distributed among the many automotive business, eating places, monetary companies, well being care and insurance coverage corporations, every contributing between 5% and 25% of gross sales.

Even with SoundHound’s spectacular income diversification and progress in lower than a yr, buyers ought to know that the corporate shouldn’t be worthwhile. SoundHound reported a non-GAAP (usually accepted accounting rules) web lack of $0.04 per share within the third quarter, an enchancment from its lack of $0.06 within the year-ago quarter.

It is not unusual for high-growth corporations to be unprofitable, however buyers must be conscious that SoundHound might take some time to show a revenue. The common analyst estimate is that SoundHound may have a lack of $0.24 per share for 2024 and that losses will slender to $0.17 in 2025.

Moreover, SoundHound inventory is pricey. The corporate’s shares have a price/sales ratio 64.8 proper now; This can be a excessive worth contemplating the S&P500It’s (INDEXSNP: ^GSPC) The P/S ratio is 3.1.

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