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SoundHound AI: Weak Numbers Under The Surface

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  • SoundHound AI's reported growth is misleading; pro forma revenues actually declined 10% in Q3, revealing underlying business weaknesses.
  • The Amelia acquisition contributed far more to revenue targets than originally suggested.
  • Despite beating EPS estimates, SoundHound AI's adjusted EBITDA loss doubled, and the share count surged, inflating the market cap to nearly $3 billion.
  • The stock's extreme valuation at 18x, 2025 sales targets is unjustified; it should revert to the $2-$4 range without clearer business performance.
  • Looking for a portfolio of ideas like this one? Members of Out Fox The Street get exclusive access to our subscriber-only portfolios. Learn More »

The original view on the Amelia deal was concerning, but SoundHound AI (NASDAQ:SOUN) rallied into earnings due to the strong reported growth rates. The business doesn't appear as impressive under the surface when looking at apples to apples numbers. My investment thesis is now Bearish on the stock due to the extreme valuation.


Read the full article on Seeking Alpha. 

Disclosure: No position mentioned. Please review the disclaimer page for more details. 

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