Are you ready for a roller-coaster ride? SoundHound AI (NASDAQ:SOUN) stock is volatile but on an overall uptrend.
It is an interesting company with strong revenue growth, but it’s also the target of a notable short seller.
SoundHound AI occupies a specific niche in the artificial intelligence technology space. Specifically, the company “offers voice AI solutions that let businesses offer incredible conversational experiences to their customers.”
DA Davidson analyst Gil Luria reiterated a “buy” rating on SOUN stock and hiked his price target on the shares from $7.50 to $9.50.
That’s encouraging, but not everyone is a big fan of SoundHound AI. So, let’s delve into the apparent controversy surrounding this fascinating AI startup.
SOUN Stock: Could It Go to $9.50 or $1?
SoundHound AI stock is definitely on an upward trajectory, but with zigzag moves that might shake out some investors. Just this year, the stock has moved from $2 to $9 and then back to the $6 area.
The share-price volatility makes Luria’s $9.50 price target seem possible. It also means that SOUN stock could decline to a much lower price point.
How much lower? Two reports from Capybara Research, which acknowledged its short position in SoundHound AI stock, show that the share price could go to $1.
One of Capybara’s main criticisms is that SoundHound AI is “losing money and there’s no clear path to profitability.”
Is that necessarily the case? Let’s see what the data tells us.
SoundHound AI: Backed by Nvidia and Improving Its Top-Line Financials
Here are the fundamental facts. In 2023’s fourth quarter, SoundHound AI generated revenue of $17.1 million. That’s up 80% year over year, not too shabby.
During that same time frame, SoundHound AI improved its gross margin by 6 percentage points YOY to 77%.
While it’s true that SoundHound AI is “losing money,” not everyone would agree that the company has “no clear path to profitability.”
SoundHound AI reported a net earnings loss of 7 cents per share in Q4 of 2023. That’s an improvement when compared to SoundHound AI’s net loss of 15 cents per share in the year-earlier quarter.
It’s also worth noting that Nvidia (NASDAQ:NVDA) reportedly owns approximately 1.7 million shares of SOUN stock.
SoundHound AI is collaborating with Nvidia to offer an innovative, generative-AI-enabled in-vehicle voice platform.
SOUN Stock: Consider a Small, Speculative Position
The most important takeaway isn’t about whether anyone should buy SoundHound AI stock. Rather, the main message is that you’ll want to conduct extensive due diligence on SoundHound AI and keep all share-position sizes small.
Whether you’re reading a short seller’s report or any other source, check all claims for accuracy. Then, apply your common sense. Learn as much as you can about SoundHound AI.
Weigh the company’s challenges and opportunities. Consider the company’s revenue growth and the Nvidia collaboration. In the end, you may be convinced to take a moderately sized stake in SoundHound AI.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.