One artificial intelligence (AI) stock that has received a lot of buzz is SoundHound AI (NASDAQ: SOUN). While the reasons for the hype are numerous, they don’t overshadow the fact that SoundHound AI is growing rapidly with a bullish outlook in 2025.
Are You Missing The Morning Scoop? Breakfast News delivers it all in a quick, Foolish, and free daily newsletter. Sign Up For Free »
As a result, the stock could continue to record serious gains, and investors may want to keep this stock on their radar heading into 2025.
SoundHound AI does pretty much what its name suggests: It incorporates AI with audio recognition. Integrating AI models with voice prompts has long been done; just take a look at the various car, home, or phone assistants. However, the recognition of voice inputs has always been OK at best, and the response quality also varied.
The company’s platform delivers strong advancements in this technology, and it has already seen widespread adoption in some fields. One area it has seen success in is restaurant order automation. Whether it’s over the phone or in a drive-thru, SoundHound has a product that can outperform humans in terms of speed and accuracy.
Another area SoundHound has seen growth is the automobile market. Specifically, through its partnership with Stellantis, SoundHound has rolled out generative AI-powered chatbots that are far more capable than the run-of-the-mill vehicle assistants most vehicles were previously equipped with. This technology hasn’t made it to the U.S. yet, but it has been integrated into newer Stellantis vehicles in Europe and Japan.
There are countless more uses for SoundHound’s technology, and the opportunities form the foundation of an attractive investment.
In the third quarter, SoundHound’s revenue rose an impressive 89% year over year to $25.1 million. A year ago, 90% of revenue came from the automotive industry, but in the latest quarter, the largest sector was only 25% as restaurants, financial services, insurance, and healthcare have all increased their share.
SoundHound isn’t profitable as it’s still in the early stages of growth. Still, investors should know its operating loss was $33.8 million for the quarter, meaning expenses more than doubled what the company generated in revenue. That said, unless SoundHound’s growth falls off substantially, this loss is not yet a major concern.
Fortunately, management is guiding for full-year 2024 revenue of $82 million to $85 million, up more than 75% from the previous year. And in 2025, management expects revenue to land between $155 million and $175 million, thanks in part to its acquisition of Amelia, an enterprise voice AI company.
As a cherry on top, management expects to deliver positive earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of 2025. I have little doubt the stock will soar if management can deliver on that bullish guidance.
Because SoundHound AI is unprofitable, a popular valuation metric to consider is the price-to-sales (P/S) ratio. The stock trades at a pricey 29 times sales.
However, that valuation is not completely out of the ordinary, especially for the market’s top AI stocks. Palantir, one of the S&P 500‘s best performers in 2024, trades at more than 55 times sales while growing revenue at a less impressive pace than SoundHound AI. That said, Palantir is also a much larger and more profitable business.
In the end, investors should be aware of the risk that comes with SoundHound’s premium valuation. Shareholders’ expectations are sky high. Meanwhile, many of its business relationships are rather new and still susceptible to disruption. As a result, investors need to ensure their position sizing is representative of the risk associated with a volatile growth stock.
If SoundHound can meet its financial targets, continue to grow its customer base, and further expand into new industries, it has the potential to extend its winning streak. In fact, I wouldn’t be surprised if SoundHound AI proves to be one of 2025’s best-performing stocks.
Before you buy stock in SoundHound AI, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $869,885!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 18, 2024
Keithen Drury has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
Prediction: SoundHound AI Stock Will Soar in 2025 was originally published by The Motley Fool
EMEA Tribune is not involved in this news article, it is taken from our partners and or from the News Agencies. Copyright and Credit go to the News Agencies, email news@emeatribune.com Follow our WhatsApp verified Channel
