SoundHound AI (SOUN, Financial) shares are seeing a notable decline, with a drop of 18.78% in stock price after the release of the company's third-quarter earnings report. Despite exceeding analyst expectations with a non-GAAP loss of $0.04 per share on revenues of $25.09 million, surpassing the predicted loss of $0.07 on revenues of $23.03 million, the market reaction has been unfavorable, likely due to a sell-off post-earnings announcement.
SoundHound AI's revenue growth continues to impress, rising approximately 89% year over year. The company has also revised its revenue forecast upward for this year and the next, anticipating 2023 revenue of between $82 million and $85 million, and 2025 revenue between $155 million and $175 million. These adjustments underscore the company's confidence in its growth trajectory.
Despite these positive financials, SOUN's trading at approximately 26.7 times this year's expected revenue points to its speculative nature. The high valuation relative to sales, combined with market volatility, suggests that while the company has strong sales growth, it might not be suitable for investors with a low-risk tolerance.
For investors who are bullish on SoundHound AI, the current price dip could present a buying opportunity. A dollar-cost-averaging strategy may help mitigate risks associated with its high valuation and market fluctuations.
It's important to note that SoundHound AI currently has a GF Value rating for investors to consider. The company's financial strength is indicated by a strong Altman Z-Score of 35.72, but there are some warning signs related to insider selling activity and a possible manipulative Beneish M-Score of -1.21. Interested investors can find more detailed valuation insights on the GF Value here.
