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SOUN shares are trading at a significant premium compared to the Zacks Computer & Technology sector. Its 12-month Price/Sales (P/S) of 14.43X is higher than the broader sector’s 6.13X, and the Zacks Computers - IT Services Industry’s 10.9X.
SOUN shares are also trading at a premium compared with AI peers, C3.ai (AI - Free Report) and BigBear.ai (BBAI - Free Report) . Shares of AI and BBAI are currently trading at P/S of 7.84X and 2.31X, respectively.
Is SoundHound AI’s premium valuation justified? Let’s dig deep to find out.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
SOUN Outperforms Sector, Industry
Year to date (YTD), SOUN shares have outperformed the sector and industry. The stock has skyrocketed 192%, outperforming industry peers like ServiceNow (NOW - Free Report) over the same timeframe. Shares of NOW have gained 42.2% YTD.
SoundHound AI has been benefiting from a strong portfolio, a solid partner base and an expanding clientele. SOUN offers conversational intelligence through independent Voice AI solutions in 25 languages in both cloud-enabled and hardware-embedded devices.
YTD Performance
Image Source: Zacks Investment Research
SOUN’s Earnings Estimates Trending Downward
SoundHound AI now expects revenues to be between $82 million and $85 million for 2024, and in the range of $155-$175 million for 2025, including the contribution from the recently announced acquisition of Amelia.
The Zacks Consensus Estimate for SOUN’s 2024 revenues is pegged at $83.63 million, indicating year-over-year growth of 82.3%. The consensus mark for 2024 loss is pegged at 37 cents per share, which has widened by a penny over the past 60 days.
For 2025, the consensus mark for revenues is pegged at $162.99 million, suggesting year-over-year growth of 94.91%. The Zacks Consensus Estimate for 2025 loss is pegged at 23 cents per share, which has widened by a couple of cents over the past 60 days.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
SOUN’s prospects benefit from a massive addressable market worth more than $140 billion that includes diverse industries like automotive, restaurants, customer service, entertainment, Smart TVs and Internet of Things-powered devices.
SoundHound AI’s prospects benefit from its expanding footprint in industries like automotive and restaurants, driven by its innovative portfolio. It currently has more than 270 patents, with over 155 granted and 115 pending.
The strong demand for SoundHound Chat AI and AI Customer Service solutions is noteworthy. Generative AI (GenAI) presents a significant growth opportunity for SoundHound AI’s prospects. Enterprise spending on GenAI is projected to grow 15-fold over the next three years to nearly $250 billion.
Total addressable market (TAM) for the restaurant market is currently pegged at roughly $3.3 trillion and is expected to hit $4.4 trillion units by 2028, thereby offering significant growth prospects for SoundHound AI.
Automotive also presents a significant growth opportunity for SOUN. TAM for the global light vehicle auto market is currently pegged at roughly 88 million and is expected to hit 95 million units by 2028.
SOUN has strengthened its footprint in the automotive industry by introducing its advanced SoundHound Chat AI voice assistant, integrated with ChatGPT, into Peugeot, Opel, Vauxhall, Alfa Romeo, Citron and DS Automobiles vehicles across 11 European markets like Austria, France, Germany, Italy, Spain and the United Kingdom.
SOUN recently announced that the SoundHound Chat AI voice assistant has launched a new customization tool to help transform how automotive brands interact with their customers within the vehicle.
SOUN’s collaborations with NVIDIA, ARM, Perplexity, Olo and Oracle are expanding its portfolio. SoundHound AI launched an advanced in-vehicle voice assistant leveraging NVIDIA DRIVE, enabling real-time and generative AI capabilities for seamless, offline access to vehicle intelligence and personalized assistance.
SoundHound AI partnered with Perplexity to enhance SoundHound Chat AI through the integration of Perplexity’s online Large Language Model capabilities for advanced and real-time voice assistant responses.
Exiting third-quarter 2024, SOUN won new partnerships that expanded its footprint in the international automotive market. It has collaborated with DayinTec, a leading Tier 1 software supplier to automotive manufacturers in China.
In the Indian market, it has entered into a partnership with VE Commercial trucks, a joint venture between Volvo and Eicher, to provide them voice AI assistance. It has also expanded its partnership with Kia, adding additional Hindi language capabilities to several models.
SoundHound AI has had wins across diverse sectors with its AI agent solutions in the third quarter. Its partnerships with Telefonica, MUSC Health, EXL, Truity Credit Union and Turret have been noteworthy. In government and military, SOUN collaborated with General Dynamics Information Technology to renew a federal government contract within a branch of the U.S. Military.
SOUN: Buy, Sell or Hold?
SOUN’s innovative AI-powered portfolio makes it well-positioned to benefit from the strong TAM of global automotive and restaurant markets. This bodes well for long-term investors.
However, SoundHound AI currently has a Growth Score of F, which means it is a risky bet for growth-oriented investors. Stretched valuation makes the stock unattractive at this moment.
Image: Bigstock
Is SoundHound AI Stock's 14.43X P/S Still Worth It: Buy, Sell or Hold?
SoundHound AI (SOUN - Free Report) shares are overvalued, as the Value Score of F suggests.
SOUN shares are trading at a significant premium compared to the Zacks Computer & Technology sector. Its 12-month Price/Sales (P/S) of 14.43X is higher than the broader sector’s 6.13X, and the Zacks Computers - IT Services Industry’s 10.9X.
SOUN shares are also trading at a premium compared with AI peers, C3.ai (AI - Free Report) and BigBear.ai (BBAI - Free Report) . Shares of AI and BBAI are currently trading at P/S of 7.84X and 2.31X, respectively.
Is SoundHound AI’s premium valuation justified? Let’s dig deep to find out.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
SOUN Outperforms Sector, Industry
Year to date (YTD), SOUN shares have outperformed the sector and industry. The stock has skyrocketed 192%, outperforming industry peers like ServiceNow (NOW - Free Report) over the same timeframe. Shares of NOW have gained 42.2% YTD.
SoundHound AI has been benefiting from a strong portfolio, a solid partner base and an expanding clientele. SOUN offers conversational intelligence through independent Voice AI solutions in 25 languages in both cloud-enabled and hardware-embedded devices.
YTD Performance
Image Source: Zacks Investment Research
SOUN’s Earnings Estimates Trending Downward
SoundHound AI now expects revenues to be between $82 million and $85 million for 2024, and in the range of $155-$175 million for 2025, including the contribution from the recently announced acquisition of Amelia.
The Zacks Consensus Estimate for SOUN’s 2024 revenues is pegged at $83.63 million, indicating year-over-year growth of 82.3%. The consensus mark for 2024 loss is pegged at 37 cents per share, which has widened by a penny over the past 60 days.
For 2025, the consensus mark for revenues is pegged at $162.99 million, suggesting year-over-year growth of 94.91%. The Zacks Consensus Estimate for 2025 loss is pegged at 23 cents per share, which has widened by a couple of cents over the past 60 days.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
SoundHound AI, Inc. Price and Consensus
SoundHound AI, Inc. price-consensus-chart | SoundHound AI, Inc. Quote
SOUN Stock Benefits From Expanding Footprint
SOUN’s prospects benefit from a massive addressable market worth more than $140 billion that includes diverse industries like automotive, restaurants, customer service, entertainment, Smart TVs and Internet of Things-powered devices.
SoundHound AI’s prospects benefit from its expanding footprint in industries like automotive and restaurants, driven by its innovative portfolio. It currently has more than 270 patents, with over 155 granted and 115 pending.
The strong demand for SoundHound Chat AI and AI Customer Service solutions is noteworthy. Generative AI (GenAI) presents a significant growth opportunity for SoundHound AI’s prospects. Enterprise spending on GenAI is projected to grow 15-fold over the next three years to nearly $250 billion.
Total addressable market (TAM) for the restaurant market is currently pegged at roughly $3.3 trillion and is expected to hit $4.4 trillion units by 2028, thereby offering significant growth prospects for SoundHound AI.
Automotive also presents a significant growth opportunity for SOUN. TAM for the global light vehicle auto market is currently pegged at roughly 88 million and is expected to hit 95 million units by 2028.
SOUN has strengthened its footprint in the automotive industry by introducing its advanced SoundHound Chat AI voice assistant, integrated with ChatGPT, into Peugeot, Opel, Vauxhall, Alfa Romeo, Citron and DS Automobiles vehicles across 11 European markets like Austria, France, Germany, Italy, Spain and the United Kingdom.
SOUN recently announced that the SoundHound Chat AI voice assistant has launched a new customization tool to help transform how automotive brands interact with their customers within the vehicle.
SOUN’s collaborations with NVIDIA, ARM, Perplexity, Olo and Oracle are expanding its portfolio. SoundHound AI launched an advanced in-vehicle voice assistant leveraging NVIDIA DRIVE, enabling real-time and generative AI capabilities for seamless, offline access to vehicle intelligence and personalized assistance.
SoundHound AI partnered with Perplexity to enhance SoundHound Chat AI through the integration of Perplexity’s online Large Language Model capabilities for advanced and real-time voice assistant responses.
Exiting third-quarter 2024, SOUN won new partnerships that expanded its footprint in the international automotive market. It has collaborated with DayinTec, a leading Tier 1 software supplier to automotive manufacturers in China.
In the Indian market, it has entered into a partnership with VE Commercial trucks, a joint venture between Volvo and Eicher, to provide them voice AI assistance. It has also expanded its partnership with Kia, adding additional Hindi language capabilities to several models.
SoundHound AI has had wins across diverse sectors with its AI agent solutions in the third quarter. Its partnerships with Telefonica, MUSC Health, EXL, Truity Credit Union and Turret have been noteworthy. In government and military, SOUN collaborated with General Dynamics Information Technology to renew a federal government contract within a branch of the U.S. Military.
SOUN: Buy, Sell or Hold?
SOUN’s innovative AI-powered portfolio makes it well-positioned to benefit from the strong TAM of global automotive and restaurant markets. This bodes well for long-term investors.
However, SoundHound AI currently has a Growth Score of F, which means it is a risky bet for growth-oriented investors. Stretched valuation makes the stock unattractive at this moment.
SOUN currently carries a Zacks Rank #3 (Hold), suggesting that investors should wait for a better entry point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.