SoundHound AI Shows Bullish Momentum Amid High Volatility and Partnerships Driving Growth Potential

Technical Analysis

SoundHound AI, Inc. (NASDAQ: SOUN) closed at $20.16 on January 2, 2025, after experiencing a 1.61% increase from the previous session. The stock is currently trading near its resistance level of $20.845, with support established around $19.69. The stock’s 50-day and 200-day moving averages, at $10.95 and $6.39 respectively, indicate a strong upward trend, signaling bullish momentum. The Relative Strength Index (RSI) of 64 suggests that the stock is approaching overbought territory, but it is not yet at a critical level. The MACD shows a positive divergence, which typically signals ongoing bullish sentiment. The Average True Range (ATR) of 12.79 suggests high volatility, which could imply significant price swings in the short term. A stop-loss at $19.11 is prudent for risk management.

Fundamental Analysis

Trading at a market cap of $7.46 billion, SoundHound AI shows promise through its innovation in voice AI technology, recently highlighted by a partnership with Lucid Motors to integrate AI voice assistants in electric vehicles. Despite a negative EPS (TTM) of -$0.35 and an unfavorable PE ratio of -57.6, highlighting ongoing losses, the company’s potential is attracting investor interest, as reflected in the consensus 'Buy' sentiment among analysts. The stock’s last closing price is significantly above analysts’ target consensus of $7.67, suggesting that the market is pricing in high growth expectations despite current earnings deficits. Meanwhile, the discounted cash flow (DCF) of -$8.68 implies the intrinsic value is below the current market value, usually a sign of overvaluation, but investor speculation and partnerships could be driving share prices upward.

Short-term Prediction

For the next trading day, given the recent bullish news and market momentum, SoundHound AI is likely to open higher and might test its resistance at $20.845. If it breaks through this level, a further upward push toward its year high is plausible. Throughout the week, volatility should be expected, especially considering the ATR, but with the positive news surrounding the Lucid partnership, short-term upward movement appears more likely.

Intrinsic Value and Long-term Potential

SoundHound AI’s long-term potential is promising due to its strategic alliances and positioning in the rapidly expanding AI market. However, the intrinsic value as indicated by the DCF analysis suggests an overvalued current market price, which often accompanies high growth potential stocks. The AI sector's projected growth could justify these valuations over time if the company can effectively capitalize on its technology and expand its market presence.

Overall Evaluation: Hold

Categorizing SoundHound AI as a 'Hold' reflects its transitional phase from speculative and innovative potential towards establishing financial performance proof. Its high valuation above intrinsic assessments calls for cautious optimism, driven largely by the strength of its partnerships and the anticipated growth within the AI sector. Investors should continuously monitor upcoming earnings announcements and market conditions to reassess their positions.