SoundHound AI Inc., NASDAQ: SOUN has been disappointing its shareholders for the last six months and it is unlikely that they will be able to change their minds anytime soon.
The California-based firm cites artificial intelligent as the primary factor driving its accelerated growth. However, there are several factors that could hinder the performance of the stock in the months to come.
The rise in competition and the rising cost of valuation are two major issues. Each of these challenges will be examined in more detail.
SoundHound isn’t a cheap stock to buy
SoundHound currently trades at over 30 price to sales ratio for the trailing 12 months.
It is alarming, even though Nasdaq’s listed company grew revenue in the latest quarter by 54%.
What is the cause for concern? The majority of stocks are unable to keep their multiples above 10 and tend to fall.
It is becoming increasingly dangerous to own SOUN at this premium price, especially since the AI firm has not yet turned a profit.
Smart investors should consider other options after a net loss of $108 Million over the last six months.
Santa Clara-based company, worth $1.74 billion, is likely to announce its financial results for the third quarter in November’s second week.
Consensus projections project an 8-cent loss per share, down from a 9-cent loss per share one year earlier.
SoundHound’s stock isn’t particularly appealing at the moment, as it doesn’t appear that its per-share losses will improve in the near future.
SOUN does not pay a dividend. This would be a great selling point.
Share price of SOUN could be affected by rising competition
SoundHound faces a growing competition on the market for voice-based AI assistants, not just from other startups but from large players such as Alphabet Inc.
Wendy’s has recently decided to automate its drive-thrus using Google’s Cloud Speech-to Text offering.
Alphabet is now directly competing with SOUN.
SoundHound’s investors should be concerned about this situation, since Google has one of the most advanced infrastructures and R&D teams for expanding their artificial intelligence footprint.
The competition in the SOUN market is also expected to increase with AI’s rapid development.
Wall Street rates SoundHound as “Buy” despite these difficulties. Analysts have a current average price of $7.79 which indicates a possible upside of 60 percent from the stock’s current price.
The SoundHound Stock: Has it had its time in the Sun? This post may change as new updates are released
