SoundHound AI (NASDAQ:SOUN) doesn’t make AI chips like some other companies do. It develops “voice AI solutions that let businesses offer incredible conversational experiences to their customers.” This may intrigue you, and we’re giving SoundHound AI stock a “B” grade but be aware of the risks as well as the potential rewards.
SoundHound AI CEO Keyvan Mohajer sees a “$100 billion opportunity” for the company’s products. These products can enable voice-AI functionality in “millions of devices,” from televisions to automobiles. That’s exciting, but as an investor, you must always temper your optimism with a healthy dose of realism.
Is SOUN Stock De-Risked After 50% Price Crash?
There’s an old saying: chasers get punished. We can find a textbook example here, as investors who bought SoundHound AI at $9.35 in March are now deep underwater.
The SoundHound AI share price has been cut in half, and that’s painful for people who bought at the peak. Cantor Fitzgerald analyst Brett Knoblauch seems to see a more favorable opportunity now, however.
After the share-price crash, Knoblauch upgraded SoundHound AI stock from “underweight ” to “neutral.” Furthermore, the Cantor Fitzgerald analyst reiterated his price target of $4.90 for SoundHound AI shares.
Perhaps there’s better reward-to-risk balance, now that SoundHound AI shares have fallen into “penny stock” territory (i.e., below $5). After all, the bullish argument for SoundHound AI remains intact.
The AI trend isn’t going away anytime soon. New use cases for AI voice software are still being discovered, including voice AI for fast-food drive-thru orders.
SoundHound AI: Monitor Your Investment
Even though SoundHound AI stock is much cheaper than it was a month ago, it’s not a 100% “safe” investment. You’ll want to keep any position size small and monitor it carefully. If SoundHound AI’s upcoming announcements indicate problems, be ready to adjust your strategy.
From a financial perspective, it’s a “good news, bad news” type of situation. In 2023’s fourth quarter, SoundHound AI’s revenue increased 80% year over year to $17.1 million. However, the company remained unprofitable, with a net earnings loss of 7 cents per share.
With that in mind, we can circle back to Knoblauch’s valuation concerns. Even after the share-price collapse, SoundHound AI’s trailing 12-month price-to-sales ratio is quite quite elevated at around 22x. For comparison, the sector median P/S ratio is 2.9x.
Knoblauch suggested that the downside risk and upside potential for SoundHound AI stock are now equal. That’s an interesting proposition, but if the risk-reward balance is really akin to a coin flip, then investors certainly shouldn’t go all in on SoundHound AI.
SoundHound AI Stock: Hear Both Sides of the Argument
Not every stock that’s down is necessarily a prime bargain. Still, SoundHound AI shares look enticing now that they’re significantly cheaper. This is especially true if you envision a broad variety of use cases for SoundHound AI’s voice-AI technology.
Therefore, risk-tolerant investors may choose to take a small and carefully monitored share position in SoundHound AI. When all is said and done, we’re assigning SoundHound AI stock a “B” grade and we’ll continue to keep tabs on this fascinating company.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
