Sign InSoundHound AI's Future Outlook Uncertain Amidst Mixed News and Overvaluation Concerns
Summary
SoundHound AI, Inc. (SOUN), a prominent player in the AI industry, has a high trading volume and is considered a small-cap company with ongoing losses; its overvaluation and mixed news sentiment make the immediate outlook unpredictable, but the stock is expected to fluctuate within a range on the next trading day with potential for growth and risks involved. (Analysis conducted on July 6, 2023)
Fundamental Analysis
SoundHound AI, Inc., trading as SOUN, is a prominent player in the artificial intelligence (AI) industry, with a varied volume of 17.09 million shares trading hands each day - an above-average trading volume compared to its average daily volume of 14.72 million. With a market cap of $789.13 million, SoundHound AI is a small-cap company. Consequently, the P/E ratio is -7.26, which reflects the ongoing losses.
Predicted revenues of $45 million for this year does reveal growth, but this is arguably overshadowed by the firm's valuation being nearly 20x its sales targets for 2023. This level of overvaluation is quite extreme and could indicate a potential contraction in the future.
The DCF model, which estimates the company's intrinsic worth, suggests a pure value of approximately $3.69 per share. This is somewhat higher than the current price, indicating possible undervaluation.
Technical Analysis
SOUN's last close was at $3.52 on July 6, 2023, demonstrating a 15.99% decrease, making it a challenging day for shareholders. However, the current price sits comfortably above the firm's 50-day moving average ($3.10) and 200-day moving average ($2.53), that demonstrates a positive uptrend.
The RSI score stands at 56, suggesting neither overbought nor oversold conditions currently. The 3-month MACD is 0.47, implying bullish conditions, as the shorter-term 12-day moving average is above the longer-term 26-day moving average.
News Sentiment
Recent news sentiment around SoundHound AI has been mixed. Positive news includes the company's share prices soaring alongside other AI stocks. There were also discussions about SOUN as a potential acquisition target, and significant gains followed the company's inclusion into the Russell indexes. Contrarily, some sentiment points out its overvaluation, advising to sell the stock.
Future Predictions and Conclusion
Given the high volatility of the AI market, the upward trend in prices, mixed news sentiment, and the company's minor overvaluation based on DCF, the immediate outlook for SOUN is unpredictable. Although the stock exhibits a positive uptrend, this reading is counterbalanced by negative news sentiment and a high company valuation.
For the next trading day (July 07, 2023), the stock price is expected to fluctuate around the current price level, between its recent low and high i.e., between $3.35 and $3.99, with a strong possibility of following any broader market trends.
Regarding the upcoming week, considering the company's inclusion into the Russell indexes and the mixed news sentiment, the price's direction remains uncertain and will be strongly influenced by any significant news or market fluctuations.
While the stock exhibits clear growth potential, there are substantial risks involved. Because of its overvaluation and the negative EPS, the stock is broadly characterized as a 'Hold'. This is largely due to its potential for growth due to its inclusion in the Russell index and the uptrend in AI stocks. However, investors should exercise caution due to the company's high valuation and potential for volatility.
