Should you buy SoundHound before earnings?Is SoundHound (SOUN) a buy now?
SoundHound is reporting Q1 results of the year 2024 on May 9, but is the stock worth it?
Since it became public that NVIDIA has had holdings in the AI voice company SoundHound, the price of the stock rallied as high as $10.4. However, the price did not hold at that level although it was after the company's negative results in the fourth quarter of 2024. The stock has been moving along with the market, following the overall trend of the AI & Semiconductor industry which has been in underperformance following unfavorable news from ASML, ARM, INTC, SMCI, and AMD. Texas Instruments did well but the company would not influence the market.
Currently, a number of analysts set a one-year price target for SOUN stock as $7.15 with a min estimate of $4.9 and a max estimate of $9.5. Currently, the price is below the lower band estimate, closing yesterday's session at $4.24.
4 Wall Street analysts strongly recommend buying SoundHound, while 2 suggest holding it. These analyst recommendations are important for most investors to make the next move. YTD, SoundHound received 4 maintenance, 1 downgrade, and most recently one upgrade on April 11.
The current technicals surrounding SOUN indicate that the stock is oversold.
In terms of the stock valuation, the software & programming industry has the following stats:
- Price to Sales of 9.56, SoundHound comes at 25.62
- Price to Book of 10.01, SoundHound achieves 84.08
While the price to sales is a strong indication of how much sales investors expect their dollar investment to generate and it's quite favorable for SoundHound, the P/B ratio is paramount as well, which's very unfavorable in SOUN situation.
Apart from valuation and technicals, SoundHound is predicted to report EPS of $-0.092 in the current quarter. This raises questions about the company's profitability, although this figure represents 28% decrease from last quarter's earnings. The audience will be watching if the company will be able to break even and perhaps turn profitable in the next few years. Nevertheless, a better-than-expected EPS figure will most likely boost investor's confidence in the stock as it will be a sign that the company is moving in the right direction.
Another important metric will be the company's segmental revenue. SoundHound now has 4 revenue segments, with the licensing revenue represents the largest segment. Hosted Services and Professional Services are in the middle range, while Monetization comes last with a decrement of approximately 25% YoY. Eyes will be on this metric because it represents a vulnerability in the company's revenue.
Overall, The stock may progress in the coming days as its next earnings date was announced May 9, which's a day after ARM reports its Q1 earnings with potential bulls in the general market.
The graph below demonstrates SOUN, SP500, & Technology sector YTD. We can see the spike in SOUN in February & Mid-March when the stock jumped from $1.95 hitting $4.0.
