Is SoundHound AI stock a buy now?

The artificial intelligence (AI) frenzy over the past year has increased investor interest in AI-focused technology companies such as SoundHound AI (SOUND 2.03%). This company has big ambitions, with its stated goal being to create “an AI voice platform that surpasses human capabilities.”

High vision is not just talk. Its technology enables SoundHound to capture customers around the world. This year too, it has made several strategic acquisitions to accelerate its business expansion.

Does this mean now is the time to pick up SoundHound stock? Here’s a look at the company to help you arrive at an answer.

AI SoundHound solution

A key factor in evaluating SoundHound stock is its technology. The company’s AI-powered voice software can handle complex voice commands, making it flexible and powerful enough to be integrated into a variety of consumer devices, including cars and televisions.

This allows consumers to speak naturally to a device when issuing commands. For example, you can ask a SoundHound-enabled car to place a food order while you’re driving to a restaurant.

The company’s technology recognizes 25 languages, which is an important feature. SoundHound generated 71% of its $13.5 million in Q2 revenue from outside the US

Its platform has attracted clients such as Hyundaiwhich signed a multi-year agreement to incorporate SoundHound software into many of the automaker’s vehicles. Peugeot, Alfa Romeo and others Stellar-owned car brands also use SoundHound.

The company applies its software to sectors beyond the automotive industry. Customer service and food ordering are additional areas where SoundHound’s voice-activated AI can work. For example, the technology can be used to take orders at a fast food restaurant. That’s why in January the company acquired SYNQ3, which provides AI voice capabilities to restaurants, expanding SoundHound’s reach to more than 100,000 restaurant locations.

It also acquired AI software company Amelia just a few weeks ago. Amelia’s diverse client base which includes clients such as Teva Pharmaceuticalsextends the SoundHound voice system to new industries, including healthcare, financial services and retail.

SoundHound’s financial strengths

SoundHound can expand its business through acquisitions due to its solid finances. The company exited Q2 with total assets of $266.7 million, including $200.2 million in cash and equivalents. Total liabilities were $42.7 million, net of debt.

Additionally, the company’s sales have grown steadily since going public in 2022.

Data by YCharts.

While its revenue growth has been excellent, its acquisitions are expected to supercharge SoundHound’s sales. For example, earlier in the year, the company forecast 2024 revenue to reach at least $63 million, which was a double-digit increase from 2023’s $45.9 million.

Now, after acquiring Amelia and SYNQ3, SoundHound expects revenue of more than $80 million in 2024 and anticipates 2025 sales to rise to $150 million.

With its strong balance sheet, rapidly growing revenue and strategic acquisitions, it’s no wonder that the consensus among Wall Street analysts is a buy rating with an average price target of $7 for SoundHound shares.

SoundHound stock decision

Despite its positive aspects, SoundHound has some drawbacks. It is not profitable, posting a net loss of $37.3 million in Q2. Acquisitions do not help here as they come with additional expenses and lower margin business.

For example, CFO Nitesh Sharan noted of Amelia, “We recognize that a significant acquisition like this will require strong integration, which will take time to fully align across the enterprise.”

But it’s worth noting that many tech companies operate at a loss for years, sacrificing profit to grow their business as quickly as possible, which is SoundHound’s approach. So lack of profitability is not a concern at this stage, especially given the phenomenal sales growth.

Another aspect is that SoundHound AI is a volatile stock as indicated by its high beta of around 3. You can also see this in the price history. Shares ranged from a 52-week low of $1.49 in 2023 to a high of $10.25 in March. This means that investing in SoundHound stock requires a high risk tolerance.

If you can handle the short-term volatility, given the company’s successful technology and anticipated sales growth, SoundHound stock looks like a worthwhile long-term investment. With shares well below their 52-week high, now looks like a good time to buy, too.