SoundHound stock price is soaring: more upside?

SoundHound stock price has gone parabolic this month and is nearing its all-time high as demand for its solutions rise. SOUN was trading at $17, its highest point since May 2022, and 1,040% above its lowest level this year. This rebound has pushed its market cap to over $6 billion.

SoundHound AI business is doing well

Many companies are now embracing the concept of artificial intelligence in their businesses as a way to boost their efficiency and lower costs. According to Gartner, worldwide spending on AI is expected to double by 2028 to over $632 billion, representing a 29% CAGR.

Companies across all industries are expected to grow this spending in that period. For example, automotive firms are adding AI in their infotainment systems, while most firms have added AI in their customer service operations. 

This growth will benefit companies that offer AI solutions to other enterprises. That explains why firms like C3.ai and Palantir have soared recently, becoming some of the biggest companies in the US. Palantir’s market cap has jumped to over $140 billion.

SoundHound is also set to benefit because of the services it offers. It is a major software provider in the Voice AI industry, which is expected to get to $160 billion by 2026. Some of its top industries are Internet of Things (IoT), automotive, restaurants, retail, and contact center. 

A good example of its business is in the restaurant industry, which has seen labor costs jump in the past few years. Restaurants with a drive-through service can use its AI voice assistant in the ordering process. Customer service agents can be replaced with AI.

Read more: SoundHound stock price analysis: Is SOUN a good AI investment?

SOUN reported strong results

The most recent results showed that the SoundHound business did well in the last quarter. Its revenue rose by 89% to over $25.1 million as the number of customers increased. 

As a result, about 12% of its revenue came from a single customer compared to 72% in the previous period. It hopes to reduce this concentration in the next few years as customers from other industries come in.

Its business is also doing well because of the rising demand for A agents, which have been embraced by companies like BNP Paribas, Sterling National Bank, and Aero Mexico.

Analysts expect that the AI agents business will continue doing well over time. The market was estimated to be worth $5.1 billion in 2024, a figure that will get to $47.1 billion in 2030.

SoundHound AI has also grown its market share in the automotive industry, where its technology has been embraced by multiple brands like Lancia, Peugeot, and Alfa Romeo. 

Valuation concerns remain

The biggest concern about SoundHound stock is that its business has become highly overvalued as its market cap has jumped to over $6 billion. 

Analysts are optimistic that SOUN’s business will continue having double-digit growth metrics. Its revenue is expected to come in at $33.73 million in the next quarter, a 96% YoY increase. It will be followed by $32 million in the next quarter, representing a 177% increase. 

For the year, SoundHound AI’ revenue is expected to be $83 million, an 82% annual increase followed by $164 million. While this growth is strong, the reality is that it is hard to justify a $6 billion valuation for the company. 

All this means that the company will need to continue delivering strong results in the next few years to justify this valuation.

SoundHound stock price analysis

The daily chart shows that the SOUN share price has done well in the past few months. Most recently, it has crossed the important resistance level at $10.25, its highest swing in March this year. The original surge happened after the company received an investment from NVIDIA.

SoundHound has moved above the ascending trendline that connects the lowest swings since February this year. It has remained above all moving averages, while the MACD and the Relative Strength Index (RSI) have pointed upwards.

Therefore, while the uptrend will continue, there is a risk that it will drop and retest the important support at $10.25. Such a drop will be good since it will be a sign of a break and retest, a popular continuation sign.

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