SoundHound AI (SOUN), an artificial intelligence (AI) company known for its voice-based solutions, has experienced an extraordinary year in 2024. As of the latest data, its stock has surged by an impressive 272%, making it one of the most talked-about tech stocks this year. While this remarkable rally has captured the attention of investors, many are left wondering if SoundHound AI’s stock can maintain this momentum in 2025, or if it has already reached its peak. Let’s delve into the key factors driving SoundHound AI’s success and what investors can expect in the coming year.
SoundHound AI’s Rapid Growth and Market Expansion
SoundHound AI offers a range of voice-based AI solutions, including automatic speech recognition, natural language understanding, and text-to-speech technologies. The company has already established a solid customer base across diverse sectors like automotive, smart devices, restaurant chains, and the Internet of Things (IoT). Notable clients include global giants such as Hyundai, Stellantis, Honda, and Kia, who have integrated SoundHound’s AI technology into their vehicles. Moreover, Qualcomm and Motorola are incorporating SoundHound’s solutions into smartphones, while restaurants are leveraging its services for online ordering and customer support.
As of the first three quarters of 2024, SoundHound has seen a 74% year-over-year revenue growth, bringing in $50 million. With a full-year revenue projection of $82 million to $85 million, the company is on track for an 82% top-line growth—a significant jump from last year’s 47% growth. More impressively, SoundHound is aiming to become profitable on an adjusted EBITDA basis by 2025, signaling its commitment to long-term sustainability.
Strategic Expansion with the Amelia Acquisition
SoundHound AI has also strategically expanded its presence in the growing customer service sector. The company recently acquired Amelia, an enterprise AI software provider, for $80 million. This acquisition is expected to significantly enhance SoundHound’s capabilities in voice-based customer support solutions across multiple industries, including financial services, healthcare, insurance, and retail.
The demand for AI-driven customer service is expected to grow at a 24% annual rate over the next five years, and with Amelia on board, SoundHound aims to capture a portion of this expanding market. The company projects $45 million in recurring revenue from this acquisition next year, and anticipates $155 million to $175 million in total revenue for 2025—nearly doubling its 2024 forecast.
Valuation and Growth Outlook: What Does the Future Hold?
Despite its impressive growth, SoundHound’s stock is currently trading at a premium valuation of 36 times its sales, which may raise concerns among some investors. The six analysts covering the stock have set a median 12-month price target of $8.50, representing a modest 8% upside from its current price. This relatively low upside suggests that the market may already have priced in much of the company’s expected growth.
For SoundHound to justify its high valuation in 2025, it will need to outperform market expectations. While the company’s bullish outlook and recent strategic moves are promising, the stock is likely best suited for investors who have a higher risk tolerance or those who are willing to take a long-term approach.
Is SoundHound AI a Stock Worth Watching in 2025?
SoundHound AI has proven itself to be a leader in the AI voice solutions space, with a rapidly expanding customer base and a promising future. However, the stock’s sky-high valuation suggests that much of its growth is already priced in. Investors should remain cautious, as the stock may struggle to deliver significant returns if it fails to meet or exceed expectations in the coming year.
In conclusion, while SoundHound AI has great potential for growth, it will need to maintain its momentum and deliver on its promised profitability and revenue targets for 2025. Investors with a long-term horizon or a high risk appetite may find the stock appealing, but those looking for more immediate returns may want to consider other options or take a wait-and-see approach.