Can SoundHound AI Break the Hot Start Curse in 2024? | The Motley Fool (2024)

SoundHound AI has more than doubled quickly for three consecutive years. The gains aren't sticking.

Investing can sometimes be about recognizing patterns, and there aren't too many situations as glaringly obvious as SoundHound AI (SOUN 15.46%). Shares of the conversational intelligence specialist have gotten off to blazing-hot starts in its first three years of trading, quickly more than doubling. The gains have yet to stick.

Following the pattern makes this an easy playbook at first. Set a reminder to pick up a piece of SoundHound at the end of this year. Unload it after it quickly doubles to avoid the inevitable fall. Unfortunately there are no big-gain certainties when it come to investing. Let's take a quick look at this three-year streak. Then let's pivot to see what SoundHound can do to break these chains.

It's a sound loop

SoundHound AI went public in the springtime of 2022 as a special purpose acquisition company, or SPAC. It opened at $8.72. Three trading days later it more than doubled, hitting a fresh high of $18.14. It was all downhill from there. SoundHound stock closed out the year badly broken at $1.77, more than 90% below its earlier high.

Last year was an encore performance. Taking advantage of a dirt cheap starting line, the stock doubled by Feb. 6. Once again, the early upticks proved fleeting. SoundHound would surrender nearly all of those gains by the end of 2023.

This year has been even more volatile. It didn't double in 2024 until Feb. 20. The pop didn't stop there. The shares would double yet again by March 13, but then that sinking feeling kicked in shortly after it briefly skimmed double digits for the first time in two years. SoundHound has now plummeted 62% from its March high.

The patterns are there, but the assumptions don't match. History isn't repeating itself. In 2022 it was just a natural post-IPO pop, something that doesn't typically happen for a SPAC deal but it's not entirely unusual. Last year it announced in early January that it was accelerating plans to achieve profitability on the heels of a targeted restructuring. Just a couple of weeks later it lined up financing to beef up its balance sheet, giving investors one less short-term concern. Growth accelerated for all of 2023 and margins did improve, but it failed to deliver on its early promise of projected profitability.

This year has followed a different script. AI stocks started 2024 hot, and then Nvidia-- now the most valuable company in the country -- disclosed a small position in SoundCloud. It's also come through with back-to-back quarters of monster growth. Every year has started with a different reason adding helium to the rally, and a different pin striking the balloon.

Can SoundHound AI Break the Hot Start Curse in 2024? | The Motley Fool (1)

Image source: Getty Images.

Getting it right the third time

SoundHound is rolling right now, even if the shares are losing steam. Year-over-year revenue growth has soared 81% and 73% in its two latest quarters, its strongest showing in more than a year. The midpoint of its full-year guidance implies that revenue growth will accelerate for the second year in a row. Profitability may continue to prove elusive for now, and it has posted larger-than-expected losses in its last two reports. The platform is still putting in the work.

SoundHound's AI-enhanced tools help its growing base of clients with speed recognition, computer-generated speech, and transcription. It's winning converts hoping to deliver a better conversational experience. It's on an annual run rate of tackling 4 billion queries.

Momentum is on its side with its recent heady growth, but margins took a step back in its latest quarter. Last month it announced that it paid off its existing debt, once again giving itself more time to get things right on the bottom line. An early arrival at positive net income could naturally change the narrative here, but it can also move higher in 2024 as a deficit-saddled company if it keeps growing and landing needle-moving deals while padding its bookings. It's time for something different, and right now that would mean holding on to its first-half gains and actually building on them in the second half of the year.

Rick Munarriz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Can SoundHound AI Break the Hot Start Curse in 2024? | The Motley Fool (2024)

FAQs

What AI stock is Motley Fool recommending? ›

The Motley Fool has positions in and recommends Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla.

What are the best AI stocks to buy now? ›

7 best-performing AI stocks
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Is soun a good stock to buy? ›

Soundhound AI (SOUN) stock has many strengths, including its ability to benefit from the AI boom and its partnership with Nvidia (NVDA). But investors are overly exuberant about the company's recent announcement while the company's valuation is very high. I give Soundhound AI stock a “hold” rating.

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What is AI's upside potential, based on the analysts' average price target? C3ai has 7.91% upside potential, based on the analysts' average price target. Is AI a Buy, Sell or Hold? C3ai has a consensus rating of Hold which is based on 4 buy ratings, 5 hold ratings and 2 sell ratings.

Who is the leader in AI stock? ›

Nvidia Corporation (NVDA)

NVDA is the best-performing AI stock over the past year. Earnings per share, or EPS, had a big leap higher in 2023, and analysts project strong EPS growth going forward. It has the highest forecasted 5-year EPS growth on the list.

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Will SoundHound be profitable? ›

By 2025, analysts expect SoundHound to generate $102 million in revenue with a positive adjusted EBITDA of $2 million. That's a promising outlook, but its stock still looks expensive, at 27 times its 2024 sales and 19 times its 2025 sales.

What is the prediction for SoundHound? ›

SoundHound AI Stock Forecast

The 5 analysts with 12-month price forecasts for SoundHound AI stock have an average target of 6.88, with a low estimate of 4.00 and a high estimate of 9.50. The average target predicts an increase of 10.52% from the current stock price of 6.23.

What is SoundHound stock prediction for 2025? ›

SoundHound AI stock price stood at $6.20

According to the latest long-term forecast, SoundHound AI price will hit $8 by the end of 2024 and then $12 by the end of 2025. SoundHound AI will rise to $15 within the year of 2026, $20 in 2027, $25 in 2029, $30 in 2031 and $35 in 2035.

What AI company is Elon Musk investing in? ›

Elon Musk's artificial intelligence company, xAI, has raised $6 billion and made big advances over the last 12 months.

Which is the best AI model for stock prediction? ›

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1EquBotAnalyze, Strategize
2Trade IdeasScan, Identify
3TrendSpiderChart, Analyze
4TradierTrade, Connect
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Which company is investing the most in AI? ›

The AI sector grew in 2021, but the industry needed capital and resources from established tech companies to develop products and services. The five tech companies that have invested the most in AI startups in 2023 are Amazon, Google, Microsoft, NVIDIA, and Salesforce.

What tech stock is Motley Fool recommending? ›

The Motley Fool has positions in and recommends Fortinet and Procore Technologies. The Motley Fool has a disclosure policy.

What is Motley Fool's all in buy stock? ›

We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...

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