SoundHound AI Shows Resilience with Potential Upside Despite Current Losses and Market Volatility

Technical Analysis

SoundHound AI, Inc. (SOUN) closed at $5.03 on August 23, 2024, marking a 2.03% increase from the previous session. The stock has shown notable resilience, currently hovering above its 50-day moving average of $4.70 and well above its 200-day moving average of $4.01, indicating a potential uptrend. The RSI14 of 63 suggests the stock is nearing overbought territory but does not indicate an immediate reversal. The MACD remains negative at -0.08, suggesting momentum could be waning, yet this could shift rapidly given recent bullish sentiment.

The immediate support level is at $4.98, while resistance is noted at $5.07. The trading volume of around 15 million is below the average volume of 24 million, hinting at less investor activity but also potentially indicating a consolidation phase.

Fundamental Analysis

With a market capitalization of approximately $1.80 billion and an EPS of -0.38, SoundHound is not yet profitable. It trades at a PE ratio of -13.24 due to its negative earnings. However, the company is backed by a significant backlog of $723 million in long-term contracts, which could provide stable revenue growth over the next several years. Recent news highlights the company's expansion into sectors such as healthcare and newly integrated acquisitions, which could enhance its market position.

Valuation models suggest a consensus target price of around $8.50, with a high target of $9.50. While the projected growth is encouraging, the underlying losses and high PE ratio indicate the market may currently favor growth prospects over immediate profitability.

Predictions

For the upcoming trading day on August 26, 2024, SOUN is likely to face resistance around the $5.07 level, with support at $4.98. A breach of these levels could impact short-term volatility. Given the current technical indicators and recent bullish sentiment, there may be a modest upward movement. Over the week, if positive trends continue and investor interest intensifies due to the company's growing contract backlog and expansion strategy, a rally toward the consensus target price is plausible.

Intrinsic Value and Long-Term Potential

The intrinsic value of SOUN is influenced by its future cash flow from existing contracts. Given the long duration of these contracts, the anticipated consistent revenue stream offers a promising long-term outlook. However, market volatility and the company's current financial metrics might deter conservative investors.

Overall Evaluation

Considering the positive momentum, significant contract backlog, and market sentiment reflected in multiple analyses indicating a consensus "Buy," SoundHound AI appears to be a suitable candidate for growth-focused investors. However, caution is warranted due to its current lack of profitability and high volatility. Based on the analysis, SoundHound AI is categorized as a ‘Buy’ candidate, supported by strong growth potential against the backdrop of future earnings announcements and expanding market applications.