When a management team forecasts a doubling of revenue in the upcoming fiscal year, it is a noteworthy occurrence that can provide insights into broader industry trends. Recently, SoundHound AI (NASDAQ: SOUN) made such a prediction, prompting investors to react positively to the company’s earnings report. The question now arises whether there is further potential for growth with revenue expected to double.
SoundHound AI stands out as an artificial intelligence (AI) company that utilizes audio input instead of text, offering unique applications such as drive-thru ordering and in-vehicle digital assistants. While other digital assistants like Amazon’s Alexa and Apple’s Siri have been around for some time, SoundHound’s superior performance makes it a technology worth monitoring. The demand for its products has been remarkable and is anticipated to rise even further.
Despite not yet being profitable, SoundHound AI is well-positioned for future success. Management projects profitability on an adjusted basis by the end of 2025, supported by a strong financial position with $200 million in cash and zero debt. While the stock’s valuation has come down from its peak, it remains relatively high at 41.2 times sales. This valuation is justified by the expected revenue growth, with the stock likely to trade at around 20 times sales by the end of 2025, aligning with industry standards for software companies.
Considering the substantial revenue backlog extending over several years, investors should anticipate continued rapid growth in the business. However, it’s essential to be prepared for volatility as the stock can experience fluctuations. Holding a position in SoundHound AI could be a viable option for investors who believe in the company’s long-term growth prospects and are comfortable with the associated risks.
Please be patient as the stock is likely to experience significant fluctuations due to its high valuation, rapid growth, and relatively small size. Don’t miss out on this second opportunity for a potentially profitable investment.
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*Stock Advisor returns as of March 3, 2025. John Mackey, former CEO of Whole Foods Market and an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Keithen Drury holds positions in Amazon. The Motley Fool has positions in and recommends Amazon and Apple. The Motley Fool has a disclosure policy.
