SoundHound AI (SOUN) Surges 4.45%: Technical Analysis & Investment Potential

Technical Analysis

SoundHound AI, Inc. (Ticker: SOUN) experienced a notable increase in its stock price, closing at $3.99 on February 20, 2024, with a change of $0.17 (4.45%). The stock's daily trading range was between $3.66 and $4.35, indicating significant intraday volatility. SOUN has shown a remarkable performance over the recent period, with a rally from its yearly low of $1.49 to a high of $5.11.

The technical indicators provide a bullish signal; the Relative Strength Index (RSI) stands at 89, which, while indicating overbought conditions, also signifies strong buying momentum in the short term. The 50-day moving average (MA) at $2.0613 and the 200-day MA at $2.398975 both are well below the current trading price, underscoring a bullish trend. However, investors should note that the Moving Average Convergence Divergence (MACD) is at 0.05828, hinting at the potential slowing down of this bullish momentum.

Notwithstanding, given the current technical setup, the stock's support level stands at $3.82, with no immediate resistance level in sight, suggesting room for upward movement in the next trading session.

Fundamental Analysis

SoundHound AI, with a market capitalization of approximately $985.23 million, falls into the mid-cap category, offering a unique position within the tech sector for investors. The company focuses on voice recognition software, a niche yet rapidly growing area as identified in the recent news highlighting Nvidia's investment. This partnership might bolster investor confidence in SoundHound's technology and market applicability.

Despite this, the firm's earnings per share (EPS) is reported at -$0.46, with a Price-to-Earnings (PE) ratio of -8.67, indicating that the company is currently not profitable. The sharp contrast between technical momentum and fundamental earnings performance suggests that investor sentiment, driven by future growth prospects rather than current profitability, propels the stock's price.

The volume of trades at 99,836,110, significantly above the average of 16,213,118, indicates growing investor interest, potentially due to the positive news flow and the broader tech sector's momentum.

Intrinsic Value and Long-term Investment Potential

While short-term technical indicators suggest bullish sentiment, the long-term investment thesis for SoundHound AI hinges on its ability to capitalize on its technological advancements and strategic partnerships. The company's involvement in AI and its recognition by significant players like Nvidia highlight its potential within the tech landscape.

However, the negative EPS and the speculative nature of investing in a non-profitable tech company require investors to weigh the growth prospects against the inherent risks. As such, the intrinsic value is difficult to determine without clear visibility on future earnings and profitability.

Overall Evaluation

Considering both the technical momentum and the fundamental aspects, SoundHound AI is labeled as a Buy for risk-tolerant investors seeking exposure to the burgeoning AI and tech sectors. The company's potential for significant growth, underpinned by strategic investments and an expanding market for AI technologies, suggests a favorable outlook.

However, it's critical for investors to consider the high volatility and the speculative nature of the investment, given the company's current unprofitability. Those with a lower risk tolerance might wait for a pullback or more concrete signs of financial health before investing.

In the next trading day and over the upcoming week, SoundHound AI is expected to maintain its positive momentum, supported by the recent bullish technical indicators and the favorable news flow. Nevertheless, given the overbought conditions, investors should closely monitor for any signs of reversal and maintain stop-loss orders to manage risks effectively.