Following a steep drop in October, SoundHound AI (SOUN 0.96%) saw an impressive 34.6% gain in November 2023, based on data from S&P Global Market Intelligence. Could this voice-control specialist be the dark horse of the artificial intelligence (AI) industry?
The company reported strong third-quarter results and launched new voice-controlled services for the restaurant sector. These positive developments helped investors overlook SoundHound’s 20.9% drop in October. Over the two months, the stock rose by 6.5%, mirroring the returns of the S&P 500 index during the same period.
Tuning in to SoundHound’s news
In Q3, SoundHound AI saw a 19% year-over-year increase in sales to $13.3 million. Adjusted net losses were reduced from $0.15 to $0.09 per share. Analysts had expected a net loss of $0.09 per share on revenue close to $12.8 million, and SoundHound either met or exceeded these expectations. The stock had already gained 9% in November before these results, but the report further boosted SoundHound’s stock performance.
A week later, investors reacted positively to the financial update, driving share prices up another 20%. Additionally, SoundHound introduced a new voice-assist system for restaurant employees, designed to provide easy access to important information for chefs and servers, even in noisy environments.
SoundHound is updating its recipe for success
While the automotive industry has been a key market for SoundHound in recent years, the company is now focusing on the restaurant industry. Recent contract wins include partnerships with major brands like Krispy Kreme and White Castle. On the earnings call in November, CEO Keyvan Mohajer hinted at a new trial agreement with “one of the largest global quick-service restaurants in the world.”
Despite the stock’s significant gain last month, SoundHound is still relatively small in terms of quarterly sales, but it is gaining traction in large target markets. With a valuation of 2.1 times trailing sales, the stock appears to be undervalued.
If you are willing to take a risk on an unprofitable AI company like SoundHound in the current era of customer acquisition and early sales growth, it might be worth taking a closer look at the stock.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
