TLDR
- SoundHound AI stock surged 26% in August after beating Q2 earnings expectations with $42.7M revenue vs $32.9M expected
- Company reported 217% year-over-year revenue growth in Q2 and raised full-year guidance to $160M-$178M
- Stock continued climbing 14.3% in September driven by tech sector momentum and Federal Reserve rate cut expectations
- DA Davidson raised price target from $15 to $17 following SoundHound’s $60M acquisition of Interactions
- The Interactions deal adds enterprise voice AI capabilities and major brand relationships to SoundHound’s portfolio
SoundHound AI has been on a tear since early August. The voice AI specialist’s stock jumped 26% last month and has tacked on another 14.3% so far in September.
The rally started with a bang on August 7th. SoundHound dropped its Q2 earnings after market close and absolutely crushed expectations.
The company posted revenue of $42.7 million versus Wall Street’s estimate of $32.9 million. That’s a hefty beat of nearly 30%. Even better, SoundHound reported a smaller-than-expected loss of $0.03 per share compared to analyst forecasts of $0.05.
Revenue growth was the real showstopper. SoundHound’s sales rocketed 217% higher compared to the same quarter last year. Sure, gross margins dipped from 66.5% to 58.4%, but investors didn’t seem to care much about that detail.
Analysts Get Bullish After Earnings
Multiple Wall Street firms jumped on the SoundHound bandwagon following the earnings report. Price targets got bumped higher and ratings saw upgrades across the board.
The stock didn’t have a completely smooth ride though. Some selling pressure emerged mid-month when an MIT study suggested 95% of businesses haven’t turned a profit on their AI investments yet. Rising inflation concerns also spooked some investors.
But SoundHound bounced back quickly. The broader tech sector’s strength helped, along with growing expectations that the Federal Reserve will cut interest rates this month.
New Acquisition Adds Fuel to Rally
SoundHound kept the momentum going in September with a strategic acquisition announcement. The company agreed to buy Interactions for about $60 million in cash. Interactions specializes in AI-powered voice assistants for enterprise customers.
DA Davidson liked what they saw. The investment firm raised their price target from $15 to $17 while keeping their Buy rating intact. They noted the deal should boost SoundHound’s margins right away and gives the company access to major enterprise brands.
The acquisition makes sense for SoundHound’s growth strategy. Interactions brings established relationships with big corporate clients that SoundHound can now tap into.
SoundHound also updated its full-year outlook after the strong Q2 performance. Management now expects revenue between $160 million and $178 million for 2024. If they hit the midpoint, that would represent 99.5% growth compared to last year’s $84.7 million in sales.
The company has been scaling up efficiently too. They’re managing to expand their customer base without burning through cash at an alarming rate. That’s always a good sign for a growth stock.
Trading at about 36.4 times expected sales, SoundHound still carries a premium valuation. But the recent sales momentum suggests there could be more upside ahead. The company recorded 85% revenue growth in 2024, so they’ve got a track record of delivering strong numbers.
SoundHound’s voice AI technology spans multiple industries including automotive, smart devices, and customer service platforms. The Interactions deal strengthens their enterprise presence while their existing partnerships continue growing.
Stay Ahead of the Market with Benzinga Pro!
Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders:
- Breaking market-moving stories before they hit mainstream media
- Live audio squawk for hands-free market updates
- Advanced stock scanner to spot promising trades
- Expert trade ideas and on-demand support
