SoundHound AI Impresses with Subscription Backlog Surge: Analysts See Positive Outlook Despite Top-Line Miss

Wedbush analyst Daniel Ives reiterated an Outperform rating on the shares of SoundHound AI Inc SOUN and raised the price target from $5 to $9.

The company delivered its fourth quarter results featuring a slight top-line miss and a miss on adjusted EBITDA.

Revenue of $17.1 million came in below the Street's $17.7 million estimate. Its subscription and bookings backlog for FY23 increased 100% Y/Y to $661.0 million fueled by strong product royalties and strength in the automotive segment, noted the analyst.

The company's FY24 guidance of $63.0 million – $77.0 million was in line with the estimate of $69.7 million and expects to see positive adjusted EBITDA as it is well-positioned to capitalize on the demand for AI chatbots, the analyst opined.

SoundHound's acquisition of SYNQ3 Restaurant Solutions will make it the largest U.S. provider of voice AI for restaurants, extending its market reach to over 10,000 signed locations and boosting deployment of generative AI capabilities into its product portfolio.

The fourth quarter was solid as the company continues to build toward profitable growth with stable revenue pillars and strong monetization capabilities to capture demand from small players to major enterprises, noted the analyst.

Cantor Fitzgerald analyst Brett Knoblauch reiterated an Overweight rating on the shares of SoundHound AI and raised the price target from $3.60 to $5.80.

The company has redefined its backlog metric, the analyst notes. While the metric shows it is gathering momentum across its restaurant offering, a metric that includes a contractually committed revenue amount, such as remaining performance obligations (RPO), would be more useful.

While the analyst acknowledges that being tied to NVIDIA Corp NVDA is a big positive, it has only made an investment in SoundHound way back in 2017 and nothing since then.

Growth can likely continue to be above 40% for the foreseeable future, and with SOUN being uniquely positioned in the AI market, the analyst believes raising the multiple used to value shares is warranted.

Price Action: SOUN shares are trading lower by 19.3% at $5.98 on the last check Friday.

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