Soundhound AI stock is 'obviously' a 'pump and dump' stock - market watcher

As the artificial intelligence (AI) rally continues full-steam ahead, voice AI and speech recognition company Soundhound AI’s stock has benefitted, climbing a significant 272% in 2024. With Soundhound AI stock such a big AI winner and its price now at levels last seen in June 2022, is there a risk of an extremely sharp turnaround?  

For analysts at Navellier, Soundhound AI is “obviously a pump and dump stock.”

Riding the AI wave

Of course, Soundhound is not the only AI company reaping the rewards of investor enthusiasm for the rapidly expanding technology. Artificial intelligence “Picks and shovels” stocks such as Nvidia (NASDAQ:NVDA), AMD (NASDAQ:AMD) and Super Micro Computer (NASDAQ:SMCI) have also been riding the AI wave. 

Nevertheless, the gains made by SOUN shares have been remarkable, up more than 330% in value over the last 12 months, the stock now sits at around $7.70 per share after pulling back slightly on Thursday following an initial high of over $10. 

What does Soundhound AI do

Based in Santa Clara, California, SoundHound AI (NASDAQ:SOUN) is a voice and audio AI platform providing end-to-end voice AI solutions, including automatic speech recognition, text-to-speech, multiple languages, and branded wake words. 

Its mobile app utilizes Automatic Content Recognition (ACR) technology to identify songs after hearing a few bars, similar to the Shazam app. Moreover, SoundHound provides additional features such as real-time lyrics, voice-activated music search, and Houndify, the virtual voice assistant. 

Soundhound AI stock forecast

At the beginning of March, analysts at DA Davidson raised their price target for Soundhound AI to $7.50 from $5 per share, maintaining a Buy rating on the stock. At the time, the firm told investors that demand for the company’s AI solution “remains elevated” as it had won a new deal with a top US-based EV maker and signed a contract with a large OEM that increases its unit volumes through 2037. 

“We are also upbeat about the company's newly established revenue source with a ‘preeminent chip company,’” they wrote. “SoundHound is winning market share and has customers knocking at its doors.”

However, all may not be as it seems. In a podcast addressing the markets today, Navellier analysts stated that while the good news for SOUN is the company’s first-quarter sales are forecasted to grow 50.6%, the bad news is that its earnings are forecasted to be -9 cents per share, down from -7 cents a couple months ago.  

“When the analyst community is lowering their consensus earnings estimate, that is not a good sign,” stated analysts at the firm. They also noted that the company posted a 16.7% earnings miss in the fourth quarter. While it has a market capitalization of $2.67 billion, “it only has an annual forecasted 2024 revenue of $69.5 million.” Soundhound AI trades at 38.4 times the forecasted 2024 revenue.

“This AI stock is obviously a ‘pump and dump’ stock,” argues Navellier, which expects its “bubble to burst after surging over 400% since early February.”