Can SoundHound AI (SOUN) Projected Strong Growth Help Reduce Caution On Its High Valuation
$SoundHound AI (SOUN.US)$ is scheduled to report its Q3 2024 earnings on 12 Nov after market close.
Analysts are expecting revenue to be up 78.47% from same period last year to $23.68 million. But even with the significant improvement of the revenue projected, earning per share is projected to be at loss of 7 cents, though slightly an improvement of same period of 9 cent loss last year.
Growing Demand For SOUN AI Solutions In Automotive and Restaurants Sectors
Driven by the growing demand for AI solutions in sectors like automotive and restaurants, SoundHound has expanded its market presence with partnerships and acquisitions, including its integration of ChatGPT in vehicles and its recent SYNQ3 acquisition. The stock has surged 227.8% year-to-date, outperforming the broader tech sector.
In addition, SOUN’s fundamentals paint a mixed picture. At this point, the company is not yet profitable. Many small growth stocks typically start their Wall Street journey in the red. But issues around profitability could deter some investors if the market questions the sustainability of future growth in the AI segment.
With a market cap of $2.58 billion, SOUN continues to benefit from its strong AI portfolio, though its high valuation may warrant caution for investors.
SOUN Post Earnings Movement
The options market overestimated SOUN stocks earnings move 89% of the time in the last 9 quarters. The predicted move after earnings announcement was ±17.9% on average vs an average of the actual earnings moves of 8.0% (in absolute terms).
But if we looked at how SOUN have performed over the past few quarter, we might not be expecting SOUN to be near profitable level.
SOUN stock price have declined more than 6% after its EPS missed the estimate, and since its public debut in 2022, SoundHound AI has faced controversies, including allegations of fake revenue and fake bookings. Nevertheless, the company has garnered significant attention in the AI sector, particularly after securing backing from strategic investors including $NVIDIA (NVDA.US)$
The integration of SoundHound Chat AI on the Nvidia Drive platform and collaborations with industry giants like the auto group $Stellantis NV (STLA.US)$ have bolstered its market position. Yet, despite these positive developments, concerns are voiced whether SOUN stock can continue to appreciate in the short run.
So I am not so positive on SOUN beating the EPS estimate.
Technical Analysis - MACD and Multi-timeframe (MTF)
On the technical, we are seeing uptrend signal being given, this could reflect investors are bullish on its strong growth anticipation.
This has also been reflected on how SOUN have been trading last week and on Monday, we are seeing SOUN trading comfortably above the short-term and long-term MA, and MACD is giving bullish crossover.
The MTF is also giving a strong uptrend for this stock, so as I might monitor and see how the price action played out for this stock during Tuesday (12 Nov) trading.
There might be an opportunity that SOUN could gave,
Summary
Based on the strong sentiment on AI demand, SOUN is benefitting from its strong AI portfolio, though some investors are concerned about the high valuation given for SOUN.
So I would expect SOUN to show earnings that could give confidence that they deserve the high valuation, like $Palantir (PLTR.US)$
Appreciate if you could share your thoughts in the comment section whether you think SOUN would be able to post an earning surprise and reduce the caution for some investors on its high valuation.
Disclaimer: The analysis and result presented does not recommend or suggest any investing in the said stock. This is purely for Analysis.
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
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