1 Outperforming AI Stock Under $10 With 40% Upside Potential

Valued at $1.7 billion by market cap, Soundhound Inc. (SOUN) is a voice AI company that develops automatic speech recognition (ASR) and natural language understanding (NLU) technologies. Its products enable businesses to create customized conversational experiences for their customers with the help of its artificial intelligence (AI)-powered platform. The company offers the Houndify developer app, as well as the SoundHound Music and Chat AI apps.

Established in 2005, the small-cap company is headquartered in Santa Clara, California, with its global client list primarily focused in the automotive, restaurant, and Internet of Things (IoT)/smart devices industries.

Soundhound stock jumped onto the radar for retail investors earlier this year when Nvidia (NVDA) disclosed an investment worth over $3 million in the company. SOUN is up an impressive 157% on a year-to-date basis, though the shares have pulled back about 46% from their March highs. 

Soundhound Reports Narrower Q2 Loss

Soundhound rallied after its second-quarter results in early August. The company is not yet profitable, and reported an adjusted loss of $0.04 per share, which came in better than expected. 

On the revenue side, the company raked in $13.46 million, which surpassed estimates of $13.0 million. Soundhound ended the quarter with a cash reserve of $201 million, up 54% YoY from $130 million reported Q2 last year.

During the quarter, the company also completed its acquisition of Amelia, a leader in conversational AI, as it aims to provide best-in-class customer support. 

“We continued to realize strong growth in the second quarter while meaningfully improving our capital structure. This is allowing us to further accelerate our organic business while capitalizing on high-impact M&A. Today's acquisition of Amelia is a key step towards harnessing the huge growth potential in conversational AI and helps us scale even faster,” said Soundhound CFO Nitesh Sharan.

Following the Amelia acquisition, management raised its revenue guidance for 2024 to $80 million, while 2025 revenue is now projected to exceed $150 million.

Soundhound is expected to release its third-quarter results on Nov. 14.

Analysts Are Bullish on SOUN Stock

SOUN has a consensus “Strong Buy” rating from the six analysts in coverage, up from “Moderate Buy” a few months ago. The stock has five “Strong Buy” ratings and only one “Hold.”

In a post-earnings comment, H.C. Wainwright analyst Scott Buck recommended scooping up Soundhound stock on the heels of its Amelia acquisition. The analyst hiked his revenue forecast for Soundhound, and said in a note that the purchase likely moved up the company's timeline for profitability to 2026. 

Buck rates SOUN a “Buy,” with a price target of $7. The average price target on Wall Street is $7.58, implying expected upside of 40.1% from current prices.

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On the date of publication, Ruchi Gupta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.