SoundHound AI (NASDAQ: SOUN) stock lost 5% of its value on Wednesday following a downgrade from Cantor Fitzgerald, citing concerns about its high valuation.
Cantor Fitzgerald analysts have downgraded SoundHound AI (SOUN) stock from Overweight to Underweight, citing concerns over the company’s valuation and growth prospects. The analysts have also revised their price target on SOUN shares, reducing it from $5.80 to $4.90.
The decision to downgrade SOUN stock stems from several factors highlighted by Cantor Fitzgerald analysts. They point to the infancy of SoundHound’s business, characterized by an opaque operating model and decelerating organic growth. In addition, the lack of capital expenditure (capex), loss of customers, and mounting competition from tech giants further compound the company’s challenges.
Cantor Fitzgerald analysts express skepticism about SoundHound AI’s current valuation, asserting that it “is difficult to justify.” The rapid increase in SOUN’s share price relative to its operational performance raises concerns about the rationality of market valuation.
According to the analysts, there appears to be more downside risk than upside potential at the current price level.
SOUN has forecasted a revenue expansion of roughly 50% for 2024, indicating an anticipated revenue of around $69 million. However, analysts believe the company’s organic revenue growth will decelerate compared to the previous year.
Analysts noted,
“That also includes inorganic contribution of its SYNQ3 acquisition, which we believe likely adds north of $5m of inorganic revenue in 2024E. Thus, on an organic basis, we believe revenue growth will decelerate in 2024E relative to 2023.”
SoundHound AI (NASDAQ: SOUN) Stock Price Action
SOUN stock plunged 4.80% to close at $7.93 on Wednesday. The traders had exchanged hands with 89,420,400 (89.42 million) shares compared to the average daily trading volume of 53.28 million.
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