If you have a budget of $5,000, consider investing in a single tech company with a long-term perspective.
Embracing the rollercoaster ride of investing in up-and-coming tech companies isn't uncommon. Their stock prices often experience drastic swings as investors grapple with assigning fair values and long-term prospects. Rather than diving headfirst, it's wise to allocate a small section of your portfolio to speculative stocks and hold onto them for the long haul. Remember Amazon's humble beginnings as an online bookseller, now worth over $10 million?
SoundHound AI (SOUN -9.01%) is one such company brimming with potential, albeit tinged with risk. So what's the draw?
What's SoundHound AI's game plan?
The future of conversational customer services is bright, with AI driving insanely profitable automation. Companies, from fast-food chains to vehicles, will quickly adopt this technology, with many already relishing the perks of SoundHound's tech.
Many big-name brands are already on board with SoundHound, such as:
The allure of substantial savings through AI-powered automation means businesses will sprint to adopting this technology. Soon, ordering food through your car or at a restaurant will be as common as paying at the pump.
According to Statista, the speech recognition market is on track to double by the end of the decade. Here's a sneak peek:
The automotive industry is waiting with bated breath for more robust voice-recognition technology. While vehicles already understand essential commands, the future plans much larger. You'll soon be able to request detailed information, like the highest-rated burger joint within ten miles.
SoundHound estimates its total addressable market at a whopping $140 billion. Even capturing a meagre portion would set the company up for success.
Should I take SoundHound's stock for a spin now?
First, let's celebrate the increase in SoundHound's revenue. Revenue soared by 89% year-over-year to an impressive $25 million in the third quarter. The good news doesn't stop there – the concentration of revenue from the company's largest customer plummeted from 72% to a manageable 12%. This reduction is music to investors' ears – losing a single client would previously have sent shudders down everyone's spine.
For the more financially minded, SoundHound projects revenue of at least $82 million in 2024, followed by between $155 million and $175 million in 2025. Pretty impressive growth, don't you think?
Now, let's talk about the stock's price. Currently, it trades at 36 times sales, which might seem steep. But fear not, my fellow investors. This markdown falls to 18 times sales at the midpoint of 2025's guidance. More significant growth would cause it to drop even further.
SoundHound’s financial health is robust, boasting $181 million in current assets and $70 million in current liabilities. The company's strong financial footing allows it to invest in growth and fund operations without worrying about the finances for now.
The not-so-great news is that SoundHound isn't yet turning a profit or generating positive cash flow from operations. However, management needs to translate revenue growth into positive cash flow soon.
Is SoundHound stock right for you?
SoundHound stock isn't for the risk-averse investor, but it holds intriguing potential, given its substantial revenue growth. However, it's essential to prioritize your investments according to your risk tolerance. Take our website's risk tolerance quiz here to help you navigate the waters.
Despite its high valuation, SoundHound stock might be worth a cautious, long-term position. Remember the lyrics to the Rolling Stones' hit "It's Only Rock 'n' Roll": "You can't always get what you want." But sometimes, you get what you need.
And speaking of music, give SoundHound's stock a listen – the future just might impress you with its harmonies.
Investing in SoundHound AI's stock could be an exciting opportunity, given its potential in the booming speech recognition market, with estimates showing a doubling by the end of the decade. The company's revenue growth, such as the 89% increase in the third quarter, also positively impacts its financial health. However, as the text mentions, SoundHound isn't yet profitable, so it's crucial to consider your risk tolerance before making an investment decision. For managing your overall investment portfolio, it could be wise to allot a portion of your finance towards speculative stocks like SoundHound, as suggested earlier in the text.