This year has been a remarkable year for SoundHound AI (Thorn 18.15%) The artificial intelligence (AI) voice solutions company’s stock has soared an impressive 272% as of this writing.
But the stock’s impressive rise isn’t entirely driven by its impressive financial performance. SoundHound soared at the beginning of the year after it was revealed that AI pioneer Nvidia had acquired a small stake in the company. And it’s also worth noting that the stock price has witnessed significant fluctuations throughout the year.
So, investors may be wondering whether this fast-rising AI stock can maintain its red-hot momentum in 2025. Let’s take a look at SoundHound’s recent movements and predict how its stock price will perform over the next 12 months.
SoundHound AI looks set for another year of impressive growth
Demand for SoundHound’s voice AI solutions is growing at a healthy pace, with revenue in the first nine months of 2024 increasing 74% year over year to just over $50 million. Management expects full-year sales to be in the range of $82 million to $85 million.
Assuming SoundHound reaches the midpoint of its guidance, top-line growth this year would reach 82%, significantly higher than the 47% growth it achieved in 2023. Additionally, the company believes it will return to profitability on an unadjusted basis. This is expected to be achieved on an interest, tax, depreciation and amortization (EBITDA) basis by the end of 2025. For context, the company posted an adjusted EBITDA loss of $15.9 million in the third quarter. 2024.
SoundHound’s impressive growth can be attributed to the rapid adoption of voice AI services. The company offers several voice-based AI solutions to its customers, including automatic speech recognition, natural language understanding, and text-to-speech. The company has already built a strong customer base across multiple industries, including automotive, restaurants, Internet of Things (IoT), and smart devices.
For example, Hyundai, Stellantis, Honda, and Kia are using SoundHound’s voice AI technology in their cars, while Qualcomm and Motorola are deploying it to smartphones. Restaurant chain uses SoundHound’s solutions for online ordering and customer service.
And now, with its recent acquisition of enterprise AI software provider Amelia, SoundHound is expanding its presence in the customer service space, where demand for voice-based AI solutions is rapidly increasing. AI adoption in this space is estimated to grow at nearly 24% annually over the next five years, reaching $1.38 billion in annual revenue at the end of the forecast period.
SoundHound is doing the right thing by enhancing its customer service offering through Amelia, which should expand its reach in additional markets such as financial services, healthcare, insurance, and retail. SoundHound paid $80 million for Amelia and expects the acquisition to generate $45 million in recurring revenue next year.
The company believes the acquisition will generate revenue of $155 million to $175 million next year. This almost doubles this year’s forecast and means growth could continue to accelerate in 2025.
Is it likely to rise further next year?
According to CNN, management has an incredibly bullish outlook, but the six analysts covering Soundhound stock have a median 12-month price target of $8.50 for the company. . This represents an increase of just 8% from where the stock is trading at the time of writing.
One reason why the median price target doesn’t show much upside in 2025 is because SoundHound trades at an expensive 36 times sales. This generous valuation suggests that the market is already pricing in the impressive growth the company will deliver.
If anything, SoundHound will have to exceed market expectations next year to justify its impressive sales multiple. Only then will stocks be able to deliver meaningful gains next year. Given the impressive gains recorded so far through 2024, SoundHound AI seems only suitable for those who are more risk-averse or ideally looking to invest for the long term.
Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Qualcomm. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
