SoundHound AI, identified by the ticker symbol SOUN, is witnessing a surge in growth expectations for the year. Previously, analysts projected a 30% increase in revenue; however, forecasts now suggest that sales could almost double. Despite some investors expressing concerns over the stock being highly valued at 36 times sales, recent data presents a contrasting narrative.
As a dedicated player in the field of voice-driven artificial intelligence (AI), SoundHound AI stands to gain from the growing investment in AI technologies. Projections indicate that by 2032, the voice AI market could exceed $40 billion, in comparison to SoundHound AI’s $85 million in revenue from the previous year.
High-growth companies like SoundHound AI may face overvaluation risks, especially at a trading rate of 36.5 times trailing sales. Nevertheless, current expectations indicate a potential 96% sales increase this year, with a nearly 20% growth forecasted for the following year. The company’s target markets are anticipated to expand by approximately 30% annually.
Over the next five to ten years, SoundHound AI has the potential to achieve double-digit sales growth, occasionally reaching triple digits. Evaluated against this backdrop, the initial 36.5 times sales ratio might seem less daunting. When taking into account the expected growth over the next 12 months, the company trades at a more reasonable 21.9 times forward sales. Projected top-line growth rates of 20% to 30% over subsequent years further enhance the feasibility of the current valuation.
Some risks remain, including SoundHound AI’s modest research and development budget, which may pose challenges against well-funded, larger tech competitors. In the short term, fluctuating growth expectations could significantly influence the stock price. However, considering the long-term perspective, SoundHound AI’s shares may not be as overvalued as they appear.
