2024-04-16 22:05:00 ET
The SoundHound AI (NASDAQ: SOUN) stock price has been in a freefall since March as the artificial intelligence (AI) fatigue continues. It has crashed from the year-to-date high of $10.23 in March to about $4.0.
AI fatigue is going on
The ongoing stock crash has coincided with the retreat in other AI companies like AMD , Nvidia, and Super Micro Computer . Most tellingly, the collapse of SoundHound’s stock has shed over $1.5 billion in value since March 14th.
There are three main reasons why the stock has plunged. First, there is a general fatigue in the artificial intelligence industry. Similarly, other AI cryptocurrencies like SingularityNET, Fetch AI, and Ocean Protocol have all retreated.
Second, there are concerns about SoundHound’s valuation even after the recent pullback. Let me put it into perspective. The company’s valuation has moved to $1.23 billion, which is much higher than last year’s revenue of $45.9 million. It also has a net loss of over $88 million in the same period.
SoundHound trades at a price-to-sales ratio of 32x, which is higher than most companies like Nvidia and AMD. Analysts expect that its revenue for 2024 will be $69.2 million followed by $102.7 million in 2025. In other words, it has a forward P/S ratio of 14, which is highly expensive.
Still, as we have seen before, a company can do well despite its valuation metrics. Just look at Nvidia, which is trading at a forward PE ratio of 34 and a forward EV to EBITDA multiple of 30.
Analysts are bullish on SoundHound stock
Analysts are still bullish on the SOUN stock price. The average estimate for the stock is $7.15, which is higher than the current $4.9. Cantor Fitzgerald’s analysts upgraded the stock from underweight to neutral. DA Davidson, HC Wainwright, and Wedbush have a bullish outlook for SoundHound.
There are a few important catalysts for SoundHound share price. The most important ones will be the upcoming earnings from semiconductor and AI companies. For example, SMCI will publish its results this week followed by Intel and AMD.
SoundHound will publish its financial results on May 10th. Analysts expect the numbers to show that its revenue rose to $10 million in Q1 from $6.7 million a year earlier.
On the positive side, SoundHound’s stock has remained above the 200-day Exponential Moving Average (EMA). It has also gotten highly oversold, meaning that it could rebound soon as investors buy the dip.
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