SoundHound AI (NASDAQ: SOUN) stock has been a roller coaster. Earlier this year, shares quadrupled after chipmaker Nvidia revealed a $3.7 million investment in the company. Since hitting their peak, shares have shed over half their value.

The underlying reality, however, has been much less volatile. SoundHound has been signing new customers, securing additional patents, and proving its technology through a growing list of real-world applications.

Will the year ahead be the company’s most exciting yet? And what will it mean for the stock price?

Expect SoundHound to focus on these three growth opportunities

SoundHound is an early leader in the voice AI technology space. The company already has more than 270 patents covering everything from speech recognition to natural language processing. But the company has patented more than just its AI technology — it has also legally protected the way it integrates with use cases. For example, the company has dozens of patents that cover the way its technology augments advertising platforms, consumer electronics, and music services.

SoundHound continues to advance its underlying technology, but the year ahead will be all about securing additional customers. On this front, the company already has an impressive start. In 2016, it essentially had zero major customers. Then, from 2017 to 2021, it signed dozens of contracts with global businesses, including Qualcomm, Honda, Hyundai, Snap, Pandora, and Vizio. More recently, it added new customers in additional categories such as restaurant operators (Applebee’s, White Castle, and Chipotle) and tech giants (Oracle and Block).

Over the next 12 months, expect it to add even more customers in three key categories: consumer products like vehicles and televisions, services like reservations and food ordering, and monetization opportunities in things like advertising and marketing platforms. SoundHound already has customers piloting its technology in each of these three categories. But it should be able to use the success of these real-world applications to sign additional customers, adding even more opportunities to further train its models, acquire more data, and prove its technology to potential adopters.

If it gets this network effect started, SoundHound could become the biggest player in the voice AI industry, which the company believes could one day be worth $140 billion or more.

Is SoundHound stock a buy right now?

The AI voice technology industry is still in its early phases, but investors are already seeing what tech giants think of this industry. In 2022, Microsoft acquired voice AI company Nuance for nearly $20 billion. This year, Apple announced a massive partnership with OpenAI that will greatly advance its AI capabilities, including that of its virtual assistant, Siri.

Over the past 12 months, SoundHound has generated $50.8 million in revenue. For full-year 2024, management expects revenue to land between $65 million and $77 million. For next year, analysts estimate revenue will jump to nearly $104 million. This strong growth has led Wall Street to give the stock an average price target of $7.43, an 88% premium to the current share price.

SoundHound’s growth trajectory is certainly headed in the right direction, but it won’t be the next few quarters that make or break the company. And short-term price targets very often miss the mark, especially for early-stage companies like this.

The main point is SoundHound should become a stronger company over the year to come. It should have more patents, more customers, and more revenue. Shares will likely be volatile in the face of short-term analyst expectations and general market sentiment, but SoundHound investors should be taking the long view.

While the stock carries a lofty valuation of 19 times sales, SoundHound’s overall market cap of $1.3 billion is still attractive relative to its long-term potential, especially when compared against historical voice AI acquisitions like Nuance’s $20 billion buyout.

The year ahead should be very positive for SoundHound from a business standpoint. But it’s the decade ahead that will ultimately determine whether buying shares today pays off. If you’re willing to accept the high-risk, high-reward proposition, SoundHound is a great pick for growth-focused investors looking for maximum upside potential.

Should you invest $1,000 in SoundHound AI right now?

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 $757,001!*

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*.

See the 10 stocks »

*Stock Advisor returns as of June 24, 2024

Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Block, Chipotle Mexican Grill, Microsoft, Nvidia, Oracle, and Qualcomm. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Where Will SoundHound AI Be in 1 Year? was originally published by The Motley Fool

Leave a Reply

Your email address will not be published. Required fields are marked *