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sound hound (Thorn -15.76%) Shares fell in Thursday trading. The company’s stock closed down 15.8%, according to data from S&P Global Market Intelligence.
Soundhound stock fell after Cantor Fitzgerald analysts took a bearish view on the company. The company released a note on the company this morning, downgrading its stock from “buy” to “sell.”
SoundHound stock continues to trade volatilely
Cantor Fiztgerald’s downgrade of SoundHound stock is noteworthy for multiple reasons. First, the company’s analysts completely skipped the neutral rating and directly downgraded the stock from buy to sell. The company also has a one-year price target of $4.90 per share for the stock, implying a further decline of about 27% from the stock’s market close on Thursday.
The drop in Kantar’s stock price followed a scathing short-seller report released by Capybara Research on Tuesday. Capybara said in the report that it considers SoundHound’s Houndify to be a commodity product with unobtrusive technology.
Short sellers have indicated that SoundHound has no material advantages compared to its better-resourced competitors, including: Amazon, alphabetand microsoftIt also suggested that the audio technology company concealed the loss of major customers, including: Netflix, Mercedes-Benzand deutsche telekom. Capybara said he believes Soundhound stock is worth less than $1 a share.
Is a bear market actually a buying opportunity?
Despite today’s decline, SoundHound AI stock is still up 215% for all of 2024 trading. At a valuation of roughly 30 times this year’s expected sales, it’s no exaggeration to say that the company is one of the riskiest and hottest AI stocks on the market right now.
SOUN PS ratio (forward) data by YCharts.
SoundHound saw revenue increase by about 80% in the fourth quarter of last year and is expected to increase revenue by about 53% this year. The company also announced that the cumulative reservation and subscription balance at the end of last year was $661 million, approximately twice as much as at the end of the previous year.
Meanwhile, the company said, “Subscription backlog refers to the potential revenue a company can achieve,” assuming that sales from existing customers will grow along a specific trajectory. SoundHound is still operating in the red, and it’s unclear when it will return to profitability.
As it stands, even after today’s selloff, SoundHound AI stock is still too risky for most investors. The company’s outlook remains highly uncertain, and this year’s dramatic gains suggest there is still plenty of downside risk.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Keith Noonan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Netflix. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
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