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SoundHound AI Shares (NASDAQ: SOUN) Get Analyst Upgrade, Win Big On The Day

Analyst Team trader
Updated 12 Apr 2024

SoundHound AI shares (+5.76%) were one of the big winners on Thursday, as the stock looks to turn around sentiment after what has been a pretty horrible last month, having shed almost half of its' value in that time.

Why was the SoundHound AI stock (NASDAQ:SOUN) up so strongly on Thursday? For one, Nvidia and other AI stocks were also trading up on the day, indicating somewhat of a sector push, but there was also an analyst upgrade on the day which could have helped shift some of the sentiment.

Analyst price targets are closely watched by markets, and after taking double downgrades in recent periods, coinciding with the rapid fall off in share price, it is only logical that the inverse should happen if upgrades in the analyst community are more forthcoming.

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We wouldn't be getting too carried away just yet. The upgrade from Cantor Fitzgerald including a rating change moves their mark on the stock from ‘underweight' to ‘neutral' and their SOUN price target sits close by at $4.90. With the stock closing out yesterday at $4.77, that brings SoundHound close to the expectations of a previous critic, which is no mean feat in such a short timeframe.

After all, it was Cantor that actioned the double downgrade on SOUN just a few short weeks ago, although some of their concerns regarding valuation multiple (previously said to be “difficult to justify”) now seem to be coming in to line.

In the latest note, Cantor analyst Brett Knoblauch indicated that the stock's multiple has contracted by 41% over the last two weeks, from 37x to 21.5x. This in their view has brought the downside and upside risk into equilibrium, noted as the cause for the upgrade into neutral territory.

Ladenburg are another firm that has released more optimistic comments in recent teams, with their own expectations of 50% sales growth expecting to put the company into positive EBITDA territory in the second half of 2025.

In their research note, Ladenburg retained the ‘buy' rating on SoundHound, and a price target of $7, reflecting significant upside from current levels. In it, they mentioned the potential for restaurants “represents one very large use case whereby HOUN's voice technology is able to harness the power of LLMs for specific business use cases to drive positive outcomes.”

Recent Performance, and Competitive Threats

Since Nvidia's investment in SoundHound became public knowledge, the ascent in SOUN shares has been meteoric. Despite sitting more than 50% below the highs hit so recently, SoundHound shareholders with a longer hold period are sitting on some pretty staggering growth numbers. More than 129% up year to date remain very firmly an outperformer on the market, and even their highly prized investor NVDA stock cannot match that.

An equally impressive 88% YTD for the AI giant with a significantly larger market cap is amazing in and of itself, but in pure terms there has been a winner, albeit one with whipsaw.

With SoundHound being in the AI voice arena, there will be competitors coming for them in the highly targeted space. OpenAI, the Microsoft backed juggernaut have recently announced their own move in to voice AI with the aptly named ‘Voice Engine'. For the time being this is not a product that is being released to market, until OpenAI are satisfied that the applications are safe, but this product will not sit on the shelf forever.

What is coming for SoundHound shareholders is likely to include more periods of volatility, but with the analyst community beginning to seem a little happier with the valuation, the hope is that it may be a little smoother than the last month.

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The AskTraders Analyst Team features experts in technical and fundamental analysis, as well as traders specializing in stocks, forex, and cryptocurrency.