SOUN - SoundHound: Now Is The Time To Be Cautious Despite Growth Spurt (Rating Downgrade)
2024-07-01 21:44:26 ET
Summary
- SoundHound has surged nearly 2x this year, driven by a rapid acceleration in its growth rate.
- In Q1, revenue growth soared 73% y/y as the company signed more deals beyond its typical restaurant drive-through use case.
- Its "pillar two" business of non-restaurant voice assistants and contact center AI agents has reached 30% of its revenue.
- Despite these tailwinds, we can't ignore the fact that SoundHound has reached elevated mid-teens revenue multiples. At the same time, losses are widening and gross margins are contracting.
- I'm downgrading SoundHound to neutral and moving to the sidelines.
One of the biggest beneficiaries to the AI rally this year is a company most investors have hardly heard of: SoundHound AI ( SOUN ), a company best recognized for using AI and automation technology to power restaurant drive-throughs. Secular tailwinds and a surge of interest in AI have driven a massive bona fide growth spurt for this company, which is now nearly doubling its revenue growth y/y. It's capitalizing on this surge of interest as well to expand, acquiring rival SYNQ3 for an undisclosed sum....
SoundHound: Now Is The Time To Be Cautious, Despite Growth Spurt (Rating Downgrade)