SoundHound AI (NASDAQ: SOUN) shares plunged after Northland Capital Markets downgraded the company’s stock on valuation concerns.
Northland Capital Markets has downgraded SoundHound AI (SOUN) stock from Outperform to Market Perform. However, the firm has raised the price target on the stock to $5.50 from $4, indicating a mixed sentiment in the market.
The downgrade comes amid Northland’s acknowledgment of SoundHound AI’s leading position in natural language processing (NLP) technology and its effective integration of proprietary technology with leading large language models (LLMs).
The analyst has spotlighted SoundHound AI’s strategic emphasis on the restaurant sector, particularly within the drive-thru domain, as a pivotal avenue for potential expansion.
However, Northland has raised concerns regarding the valuation of SoundHound AI. The company is currently trading at 28 times its forecasted 2024 revenue and 17 times its forecasted 2025 revenue, making the valuations appear steep when compared to industry benchmarks such as the ‘rule of 40’.
Moreover, the firm has emphasized the importance of closely monitoring the timelines for deploying SoundHound AI’s technology in restaurants and drive-thrus throughout the year. While the company demonstrates strength in technology and market focus, the pace of adoption in these sectors could significantly impact its future performance and valuation.
SoundHound AI (NASDAQ: SOUN) Stock Price Action
SOUN stock plummeted 7.58% to close at $6.34 on Wednesday. The traders had exchanged hands with 116,862,172 (116.86 million) shares compared to the average daily trading volume of 27.90 million.
Edward Cooke is a financial analyst, freelance writer, and editor. He has six years of experience in financial journalism. He has an in-depth understanding of equities markets, tracking major indices and providing real-time analysis on stock price movements, corporate earnings, and market sentiment.
