SoundHound AI (NASDAQ: SOUN) was one of the standout performers in the stock market in 2024, with shares skyrocketing by 836%. At its peak, the stock climbed a remarkable 1,040%, capturing widespread investor attention. However, this surge has come to a halt. Since its December peak, SoundHound AI’s stock has experienced a steep decline, now sitting approximately 60% below its all-time high.
For those who invested at the height of its rally, the downturn has been a hard blow. However, for investors who missed the initial surge, the question remains: does the current slump present a buying opportunity?
Innovation in AI-driven Audio Solutions
SoundHound AI, a global company, differentiates itself by focusing on audio inputs for AI models, as opposed to the commonly explored text-based inputs. This unique specialization creates opportunities for its software in industries where voice interaction is essential. Its major market applications currently include the restaurant and automotive sectors.
The company’s software has gained traction in automating drive-thru experiences for restaurants such as Jersey Mike’s and White Castle. While it has yet to be integrated into digital assistants in U.S. vehicles, SoundHound’s partnership with international automakers like Stellantis signals a promising future for its technology.
Strong Growth Metrics
SoundHound’s growth trajectory has been impressive. The company reported a 101% year-over-year increase in Q4 revenue to $34.5 million. For the full year, revenue grew by 85% to $84.7 million. Looking ahead, management projects revenue growth of nearly double in 2025, with expectations of between $157 million and $177 million.
Despite this momentum, the stock’s dramatic sell-off has raised questions about its valuation. At its peak, SoundHound traded at over 100 times sales, a lofty multiple that was difficult to sustain. The stock now trades at 41 times sales, still high but more palatable given its rapid growth.
A Look Ahead
If SoundHound doubles its revenue in 2025 as projected, its valuation could normalize to approximately 20 times sales—closer to the higher end of software industry averages. However, sustained growth beyond 2025 will be critical to justify its current valuation.
Another indicator of the company’s future prospects is its bookings backlog, which stood at $1.2 billion at the end of Q4, up 75% year over year. Management expects to convert $167 million of this backlog into revenue in 2025, with over $1 billion to be recognized in the following years.
For investors, the decision to buy now hinges on confidence in SoundHound’s ability to maintain its growth trajectory. While risks remain, the company’s expanding footprint and robust revenue growth could position it for future gains, making it a potential opportunity for those willing to take the leap.