The corporate is benefiting instantly from the rise of AI, and subsequent yr must be a yr of progress.
SoundHound AI (SOUND -1.00%) the inventory was a curler coaster. Shares quadrupled earlier this yr after the chip maker Nvidia confirmed a $3.7 million funding within the firm. The inventory has greater than halved since reaching its peak.
Nonetheless, the underlying actuality was a lot much less risky. SoundHound is signing new prospects, securing further patents, and proving its expertise via a rising listing of real-world functions.
Will subsequent yr be the corporate’s most fun but? And what is going to this imply for the share worth?
Anticipate SoundHound to deal with these three development alternatives
SoundHound is the primary chief in voice synthetic intelligence expertise. The corporate already has greater than 270 patents protecting all the pieces from speech recognition to pure language processing. However the firm has not solely patented its AI expertise – it has additionally legally protected the best way it integrates with use circumstances. For instance, the corporate has dozens of patents protecting how its expertise enhances promoting platforms, shopper electronics and music providers.
SoundHound continues to develop its core expertise, however the subsequent yr will deal with attracting further prospects. On this entrance, the corporate is already off to a powerful begin. In 2016, he had virtually no main shoppers. Then, from 2017 to 2021, she signed dozens of contracts with international firms, together with Qualcomm, Honda, Hyundai, Tie upPandora and Vizio. Extra just lately, it has added new prospects in further classes comparable to restaurant operators (Applebee’s, White Fort and Chipatl) and expertise giants (Oracle and Block).
Over the subsequent 12 months, count on it to have much more prospects in three key classes: shopper merchandise like automobiles and TVs, providers like reservations and meals ordering, and monetization alternatives in issues like promoting and advertising and marketing platforms . SoundHound already has prospects piloting its expertise in every of those three classes. Nevertheless it ought to be capable to use the success of those real-world functions to signal on further prospects, including much more alternatives to additional prepare its fashions, get extra information, and check its expertise with potential customers.
If it will get this community impact going, SoundHound might change into the largest participant within the voice AI business, which the corporate says might in the future be price $140 billion or extra.
Is it doable to purchase SoundHound inventory proper now?
The AI voice expertise business remains to be in its early levels, however traders are already seeing what the tech giants are eager about the business. In 2022 Microsoft acquired voice synthetic intelligence firm Nuance for practically $20 billion. this yr, an apple introduced a broad partnership with OpenAI that can considerably broaden the capabilities of synthetic intelligence, together with the digital assistant Siri.
SoundHound generated $50.8 million in income over the previous 12 months. For the complete yr 2024, administration expects income to be between $65 million and $77 million. Subsequent yr, analysts count on earnings to leap to just about $104 million. That robust development has led Wall Avenue to offer the inventory a mean goal worth of $7.43, representing an 88% premium to the inventory’s present worth.
Positive, SoundHound’s development trajectory is headed in the best route, however the subsequent few quarters will not assist the corporate develop. And short-term worth targets fairly often miss the mark, particularly for such early-stage firms.
The underside line is that SoundHound must be a stronger firm over the subsequent yr. It ought to have extra patents, extra prospects and extra income. Shares are prone to be risky resulting from short-term analyst expectations and total market sentiment, however SoundHound traders ought to take the lengthy view.
Whereas the inventory is valued at 19 occasions gross sales, SoundHound’s complete market cap of $1.3 billion stays engaging relative to its long-term potential, particularly in comparison with historic voice AI acquisitions such because the $20 billion buyout of Nuance {dollars}.
The yr forward must be very constructive for SoundHound from a enterprise perspective. However the subsequent decade will in the end decide whether or not shopping for shares at this time pays off. When you’re prepared to simply accept a high-risk, high-reward proposition, SoundHound is a wonderful selection for growth-oriented traders in search of most development potential.
Ryan Vanzo has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Apple, Block, Chipotle Mexican Grill, Microsoft, Nvidia, Oracle and Qualcomm. The Motley Idiot recommends the next choices: lengthy January 2026 $395 calls on Microsoft and quick January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
