Can the Exceptional Artificial Intelligence (AI) Stock Potentially Achieve a Second 800% Increase in 2025, Following Its 2024 Success?

Can the Exceptional Artificial Intelligence (AI) Stock Potentially Achieve a Second 800% Increase in 2025, Following Its 2024 Success?

Skip the moon metaphors, yeah? Stocks ain't space travel, they're investments. Hype and enthusiasm might carry you for a while, but in the long run, performance generally tracks fundamentals. Just ask those 2021 stocks that had a rough landing in 2022. But let's not have a pity party for SoundHound AI (SOUN -0.36%). Even with a staggering 835% increase in one year, the stock's still triple its 2022 value.

2025 hasn't been kind to SoundHound AI, though. The stock's down 46% from that 2024 peak, but that's still more than 500% above where it started in 2024. SoundHound investors have been on a rollercoaster ride since the stock's IPO in 2022, with an initial surge followed by a tech dive in 2022 due to financial question marks. The stock hit a low of $0.97 in late December 2022.

Investors, old and new, are wondering if SoundHound AI can reverse its recent downturn and reclaim those 2024 levels. So let's dive into why it surged in 2024 and if it's worth buying now.

Speaking of Tech: SoundHound AI's AI Advantages

Artificial intelligence (AI) ain't just a buzzword. It's a field with a lot of potential, covering everything from autonomous driving to robotics, to data centers, and machine learning. Speech recognition is a subset of AI, and it's all over the place now, from drive-thru restaurants to customer service to car technology.

SoundHound AI's conversational intelligence software comes in handy for many industries, including restaurants and automobiles. In fact, the company's added some big names to its client base lately, like Church's Texas Chicken and Torchy's Tacos. Plus, it showed off an impressive feature at CES in Las Vegas: an in-vehicle voice assistant that can order takeout.

AI's market size is projected to double from 2024 to more than $16 billion by 2030, according to Statista. That's great news for a company like SoundHound AI.

Checking the Numbers: SoundHound AI's Sound Financials

SoundHound AI finished 2022 with $9 million in cash and $38 million in current liabilities. That's a tough spot for a company that wasn't profitable or cash flow positive. But things look a lot better now. By the end of Q3 2024, it had $136 million in cash, $70 million in current liabilities, and a healthy balance sheet. Management increased its financial stability by issuing more stock, which diluted existing shareholders but helped the company's financials.

Revenue is also on the rise for SoundHound AI. The company reported $25 million in revenue in Q3 2024, bringing its 12-month total to $67 million. Management expects up to $85 million in total sales for 2024 and between $155 million and $175 million in 2025.

The technology is impressive, the expanding client base is driving sales growth, and the company's financials are looking up. But is SoundHound AI a good buy now?

Investing in SoundHound AI: Is it Worth it?

Valuation can be tricky in a bull market, but even with all the AI hype, investors should still be aware of high-valuation stocks. SoundHound's current market cap is $5.2 billion, which means investors are paying about 64 times 2024 sales forecasts and 36 times the midpoint of 2025's forecast. That's expensive, even for a high-growth company that isn't yet profitable. Historically, the stock has traded for an average of 20 times sales, implying a more reasonable market cap of $3.3 billion based on the midpoint of 2025's sales forecast, and a potential 35% drop in the stock price.

But don't dismiss the potential for 2025 sales to double 2024 totals, which could make the current valuation seem less concerning. Analysts expect SoundHound's sales to hit approximately $200 million in 2026, which is still impressive growth, though it means investors are shelling out nearly 30 times next year's sales for SoundHound at today's stock price.

It's a buyer's market for SoundHound AI, but only if investors are patient and wait for a more reasonable valuation.

Despite SoundHound AI's impressive improvements in revenue and financial stability, the stock's current valuation remains high, with investors paying 64 times 2024 sales forecasts and 36 times the midpoint of 2025's forecast. This high valuation might be justified if SoundHound's sales significantly increase in the future, but for now, it could present an opportunity for patient investors to wait for a more reasonable valuation. In the world of finance and investing, money and performance can be closely tied, and SoundHound AI's future growth will play a significant role in determining its long-term investment potential.

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