Shares of SoundHound AI (NASDAQ: SOUN) sank following the discharge of its third-quarter results, despite the voice artificial intelligence (AI) company seeing surging revenue within the quarter. Nonetheless, the stock remains to be up about 200% on the 12 months, as of this writing.
With the corporate reporting strong revenue growth, let’s take a more in-depth take a look at the corporate’s most-recent results to see if that is a great opportunity to purchase the stock on this dip.
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Despite the drop in its stock price, SoundHound’s Q3 results were actually quite strong. The corporate’s revenue surged 89% 12 months over 12 months to $25.1 million. Adjusted earnings per share (EPS) got here in at a lack of $0.04, which was a pleasant improvement from the $0.06 loss it reported a 12 months ago. Those numbers topped the analyst consensus calling for revenue of $23 million and a lack of $0.07, as compiled by Factset.
It said that its cumulative subscriptions and bookings backlog, excluding its acquisition of Amelia, was double the year-ago period. It said that this number could be greater than $1 billion, including Amelia, with a median duration of its contracts of around six years.
Throughout the automobile space, the corporate said it saw double-digit automotive unit growth within the quarter, in addition to double-digit unit price expansion. It noted last 12 months that it had a big point-in-time take care of a big customer but that it has more software-as-a-service (SaaS)-like revenue now, given its scale and greater diversification. It also said it won a take care of a latest up-and-coming Middle Eastern electric vehicle manufacturer.
Throughout the restaurant vertical, SoundHound says it now has seven of the highest 20 quick-service operators as customers. It continues to expand its drive-thru, phone orders, and worker assistance services. It also noted that it recently signed one other large top-three global pizza chain.
With its recent acquisition of Amelia, the corporate also made inroads into a variety of other verticals. Throughout the quarter, it won or renewed deals within the telecom, healthcare, insurance, retail, and banking spaces. It also renewed deals with a branch of the U.S. military and a top multinational payment card services company.
SoundHound increased its full-year revenue outlooks for each 2024 and 2025. For 2024, it now expects revenue to are available between $82 million and $85 million, which is up from a previous outlook calling for revenue to exceed $80 million. Analysts were searching for revenue of $82.6 million.
For 2025, the corporate raised its guidance from an expectation of revenue to be greater than $150 million to a spread of $155 million to $170 million. The analyst consensus was for 2025 revenue of $152.1 million.
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By all accounts, SoundHound turned in a superb quarter and issued strong guidance. Given the stock’s rise this 12 months, nonetheless, investors perhaps wanted an excellent larger guidance increase.
Yet the corporate sounded conservative in its forecast. It remains to be integrating the Amelia business, and it might look to jettison some lower-margin parts of its business. Amelia, though, is vital for the corporate because it helps close some technology gaps and allows it to expand into more verticals.
Each the auto and restaurant industries remain ripe with growth opportunities, but SoundHound’s ultimate goal appears to change into an AI voice ecosystem across industries that might help organizations handle very industry specific, sophisticated interactions. The corporate is rolling out its latest Polaris foundation model, which it says it built on billions of real conversations, but I might imagine that adding Amelia information to future generations will help its AI models much more.
From a valuation perspective, SoundHound trades at a price-to-sales (P/S) multiple of 15 times 2025 analyst estimates, which is not particularly low-cost.
This company remains to be very much in its infancy with an enormous opportunity in front of it. If the corporate can change into the AI voice leader across industries, then the sky is the limit. And while its valuation is not low-cost, it also is not outrageous given its growth.
Given where the corporate is in its lifecycle, I view it as a solid but speculative growth stock. As such, I believe investors can take a small position within the stock on this pullback.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends FactSet Research Systems. The Motley Idiot has a disclosure policy.
