SoundHound AI Reports Strongest Ever Quarter, Should You Buy?
However, SoundHound AI's shares jumped 26.4% on Friday after the company reported record second-quarter revenues that exceeded Wall Street's expectations. Does this suggest SoundHound AI is set for a bull run, making now a good time to invest in it? Let's look into this more.
SoundHound AI Posts Huge Q2 Revenue Increase, Boosts Outlook
SoundHound AI's second-quarter revenues jumped 217% year over year to $42.68 million, surpassing Wall Street's estimate of around $32.9 million. The company reduced its loss to 3 cents a share from the previous year's 4 cents. Wall Street analysts had expected an adjusted loss of 5 cents a share.
CEO Keyvan Mohajer called it SoundHound AI's 'strongest ever quarter' and mentioned that earlier strategic decisions have led to significant results, driving growth across all business divisions. The automotive division performed notably well, with its voice assistant expected to be integrated into a major original equipment manufacturer (OEM) producing vehicles for both Chinese and global markets.
The company increased its full-year outlook due to adding more customers, mainly in China. SoundHound AI now expects total revenues for the year to range from $160 million to $178 million, up from its previous forecast of $157 million to $177 million. Revenues have been steadily increasing, suggesting that it may reach the upper end of its latest sales estimate.
More Reasons to Be Bullish on SoundHound AI
The worldwide acceptance of AI-powered voice-recognition systems is expected to occur quickly as they continue to improve. Its demand is popping across restaurants, smart devices and automobiles, to name a few. Statista projects the total addressable market for AI-led voice-recognition systems to be $8.6 billion in 2025, and it would likely grow to $15.9 billion by 2030. This gives SoundHound AI a tremendous opportunity to grow.
SoundHound AI has a successful business model that generates revenues through monthly subscription services paid by customers. The company is consistently acquiring new customers, leading to expectations of ongoing revenues and more reliable cash inflows.
Restaurants such as Casey's General Stores, Inc. CASY and Chipotle Mexican Grill, Inc. CMG are implementing voice automation in response to increasing customer demand, which is advantageous for SoundHound AI.
Here's How to Trade SOUN Stock
The successful recurring revenue model, the increasing significance of AI-driven voice-recognition technology, and the record revenues achieved in the latest quarter, along with a positive outlook, should motivate SoundHound AI stakeholders to hold their investment for long-term benefits.
Brokers are also optimistic about the company's prospects. They predict SOUN stock's average short-term price target at $11.50, reflecting a 7.3% increase from the last closing price of $10.72. The highest target is $18, indicating a potential upside of 67.9%.
Image Source: Zacks Investment Research
Despite SoundHound AI's solid sales so far, the company isn't profitable. It has a negative net profit margin as it struggles to generate enough revenues to cover its costs. Therefore, it would be wise for new investors to avoid investing in the stock at this time.
Image Source: Zacks Investment Research
SoundHound AI currently has a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here.
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