Shares of SoundHound AI (SOUN: NSD) skyrocketed by 66.7% today after news broke that tech giant Nvidia (NVDA: NSD) had acquired a stake in the company. However, analysts urge caution despite the surge, citing SoundHound’s lack of profitability and post rally valuation concerns.
Stock Target Advisor’s Take on SoundHound AI:
According to Stock Target Advisor‘s analysis, SoundHound AI Inc’s current rating is a ‘Strong Sell. This rating stands in stark contrast with the average rating of ‘Strong Buy’ given by four analysts who have set the average target price for SoundHound at $4.52.
Even though things have looked bad so far, SoundHound has caught the attention of four dedicated analysts, who have given it an average rating of “Strong Buy” and a goal price of $4.52.
The Software – Application sector includes SoundHound. Stock Target Advisor rates this sector as “Slightly Bearish.” For this sector, the average gain in one month is 4.76%.
Red Flags for SoundHound Stock:
Despite showing a high Gross Profit to Asset Ratio, SoundHound spills over a bucket of red flags that investors should not overlook. The stock is overpriced compared to its book value, which is further plagued by low dividend returns, unsatisfactory risk-adjusted returns, negative cash flow, and negative free cash flow.
Furthermore, it shows poor signs in terms of low revenue growth and low earnings growth. In terms of trailing 12-month returns, SoundHound’s capital gain is 2.73%, placing it in the 63.64% sector percentile ranking.
Conclusion:
SoundHound’s market image improved with Nvidia’s investment. Investors in SOUN must look past the glamour. Despite SoundHound’s AI leadership and Nvidia’s trust, its lack of profitability, possibly inflated value, and worrying long-term performance metrics cannot be disregarded.
Muzzammil is a content writer at Stock Target Advisor. He has been writing stock news and analysis at Stock Target Advisor since 2023 and has worked in the financial domain in various roles since 2020. He has previously worked on an equity research firm that analyzed companies listed on the stock markets in the U.S. and Canada and performed fundamental and qualitative analyses of management strength, business strategy, and product/services forecast as indicated by major brokers covering the stock.
