SoundHound AI Faces Volatility Amid Bullish Sentiment and Earnings Concerns as 2025 Begins

StockInvest.us, 1 month ago

StockInvest.us Technical Analysis

SoundHound AI, Inc. (SOUN) closed at $19.84 on December 31, 2024, having declined by 12.52% during the day. The stock traded within a range of $19.31 to $22.68 for the day, with considerable trading volume of 66.91 million shares, surpassing its average volume of 58.28 million, suggesting heightened interest or activity. The Relative Strength Index (RSI) of 62 indicates the stock is not overbought or oversold but leans towards mild bullish momentum.

The Moving Average Convergence Divergence (MACD) value of 4.89 suggests a bullish trend in the short term; however, the Average True Range (ATR) of 13.41 denotes that SOUN experiences significant price volatility. Strong support is identified at $19.69, and immediate resistance is at $20.845. Given the elevated RSI and breach of support levels, further downside risk exists if the current bearish sentiment persists.

Fundamental Analysis

Despite a dramatic increase of over 1,000% in 2024, the challenges for SoundHound AI include its negative earnings per share (EPS) of -0.35 and a Price-to-Earnings (PE) ratio of -56.69, indicating unprofitability and potential misalignment with market expectations. The earnings announcement on February 26, 2025, will be crucial for further insights. SoundHound AI has been favorably driven by broader investor enthusiasm in AI, underscored by Nvidia's small stake in the company, which adds to its allure.

Market consensus reveals a "Buy" inclination with projections around $7 to $9, indicating potential downside as the current market price significantly exceeds analyst targets, suggesting a possible correction in the near term.

SoundHound AI, Inc. Intrinsic Value and Long-term Investment Potential

The discounted cash flow (DCF) analysis presents a negative value of -8.68, signaling potential overvaluation based on current expectations of cash flow. This discrepancy raises caution around intrinsic value, juxtaposed with the bullish market sentiment. Over the long term, continued strength in AI and possible strategic partnerships could alter growth trajectories favorably, yet profitability remains a key area of concern.

Short-term Outlook

For the next trading day on January 02, 2025, SOUN may experience volatility as traders react to year-end financial results and broader market conditions. The past week's market correction could extend into the early days of 2025 if risk-off sentiment persists. Throughout the upcoming week, investor focus will likely pivot on broader market trends in AI and technology sectors, as well as any company-specific developments.

Overall Evaluation

SOUN can be categorized as a 'Hold' candidate. Despite recent impressive stock performance and interest from industry giants like Nvidia, the significant deviation from intrinsic valuation and negative financial metrics necessitate cautious optimism. Investors should evaluate further developments in earnings performance and broader AI market trends before re-evaluating their positions.

Check full SoundHound AI, Inc. forecast and analysis here.