Sundry Photography
In the first few weeks of trading this year, the AI rally had continued to build up fervent steam: until recently, when trade war terrors and recession fears have driven a deep gash in valuation multiples for the market’s most
SoundHound AI: A Near-Term Bottom May Be Approaching, But Watch For End Market Weakness (Rating Upgrade)
Summary
- SoundHound's stock has plunged over 60% since January, prompting me to upgrade the stock to a neutral rating due to its substantial decline and ongoing growth.
- Positives include SoundHound's early leadership in voice-enabled AI, impressive blue-chip client roster, and a vast $140 billion market opportunity.
- Concerns include tariff threats in key end markets, a distracting shareholder lawsuit, and a still-premium valuation at 17.5x EV/FY25 revenue despite the recent crash.
- SoundHound's Q4 revenue doubled, beating expectations, but future growth is uncertain with back-end loaded demand and a possible slowdown in bookings from the restaurant and auto client segments.
With combined experience of covering technology companies on Wall Street and working in Silicon Valley, and serving as an outside adviser to several seed-round startups, Gary Alexander has exposure to many of the themes shaping the industry today. He has been a regular contributor on Seeking Alpha since 2017. He has been quoted in many web publications and his articles are syndicated to company pages in popular trading apps like Robinhood.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.