Looking at Wall Street analysts’ price targets can be a worthy exercise, because it may identify some stocks with huge upsides you haven’t considered. After finding such a stock (at least according to analysts), the best move is to do your own research and see if you can confirm their findings. One stock with massive upside is SoundHound AI (NASDAQ: SOUN), a small artificial intelligence (AI) company.
Gil Luria from D.A. Davidson has a price target of $9.50 on SoundHound’s stock. This was last updated on Sept. 30, so the analyst’s target is based on the same information that all investors have access to now. That price target indicates around a 60% upside, which would be a fantastic one-year run for the stock.
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Is this a legitimate price tag? Or should investors steer clear? Let’s find out.
SoundHound AI does what its name implies: It uses AI to help identify and process sounds. While recognizing audio and converting it into something that can be input into a computer is a very broad and useful technology, SoundHound is finding commercial success in two specific areas: restaurants and automaking.
On the restaurant side, the company is helping streamline operations by using its AI model to take drive-thru and mobile orders. The performance of these models often exceeds that of the humans they supplement, allowing restaurants to become more efficient.
On the automotive side, the company has been integrating its technology with various generative AI models to make driving assistants more useful. Its most notable client is Stellantis, and SoundHound’s model has been integrated with various makes and models under the manufacturer’s umbrella in Europe and Japan.
Those are relatively niche uses for the technology but finding success in a few areas before expanding elsewhere is key when growing a company. The business case is there, but how about its financials?
SoundHound is still a relatively small company, so its revenue figures may not jump off the page at you. In the second quarter, it generated $13.5 million in revenue, up 54% year over year.
However, it has a revenue backlog totaling $723 million. This shows the huge demand for its technology, but it takes a while to integrate and test out before SoundHound can recognize it as revenue from its partnerships.
