Artificial intelligence (AI) stocks have skyrocketed in recent months thanks to their potential to transform many industries. There could be many winners, including companies selling AI tools or using those tools to make their businesses more efficient. Investors who buy shares of these players can also win.
While many of these AI players have grown into double and triple digits, some may still have plenty of room to run. We're still in the early days of the AI story, so an AI company that's just ramping up its technology and signing up customers, for example, could see its stock rise as earnings begin. .
This may be the case for an AI stock that Wall Street views favorably. According to the average Wall Street estimate, this particular player could grow by 70% in the coming 12 months. I'm talking. Sound Hound AI (NASDAQ:SOUN)A voice AI specialist that has grown nearly 100% this year. Is it time to buy, or is Wall Street too optimistic?
SoundHound's sound technology
SoundHound is the technology that powers some of our everyday conversations, like ordering at a restaurant or interacting with our cars by voice. For example, Hyundai has integrated the company's voice recognition system into some of its vehicles, giving drivers the ability to ask their cars about the weather, sports, or even the performance of their favorite stocks. And most recently, SoundHound said it will go live at 100 White Castle drive-thru lanes by the end of the year.
Today, voice-AI experts primarily work in the restaurant and automobile sectors, but the market opportunities are vast, and SoundHound aims to address sectors such as the financial, healthcare, and retail industries in the coming years. Is. This gives SoundHound a total addressable market of over $160 billion by 2026.
SoundHound isn't the only voice-AI creator, but it has some competitive advantages that could help it win in the long run. Its technology, protected by more than 100 patents, takes speech and translates it directly into meaning. This makes it faster and more accurate than traditional systems that involve translating speech into text before determining the meaning. The company's technology also supports complex conversations, another feature that helps it stand out.
This voice-AI innovator generates revenue through the placement of its products and services, but also sees the potential for significant revenue growth by charging commissions when users of its products access various services — such as When a voice-activated car driver orders at a voice-activated restaurant. That restaurant would pay a commission to SoundHound, and the company would share that commission with the automaker.
A solid order backlog
Today, SoundHound's revenue is growing, and the backlog of orders is strong. In the most recent quarter, earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted earnings grew 80%. And the backlog of subscriptions and orders at $661 million is 2x higher than the same period a year ago. SoundHound also reported an annual run rate of 3.5 billion queries, up 50 percent from last year.
It's clear that there is interest and demand for SoundHound's products. Still, it's important to remember that the company is small, with about $17 million in revenue per quarter, so it has a long way to go to reach profitability and other goals.
Let's get back to Wall Street estimates. It's very possible that Soundhound stock could rise 70% in just one year if the company continues to report solid revenue growth and order backlogs. The company has interesting technology, backed by several patents, and is showing that consumers are interested in its offerings. Since the company is not yet profitable, however, any hiccups along the way could unnerve investors and weigh on the stock price.
All of this means it's best to consider your investment style before you get Wall Street optimistic about Soundhound. If you are a cautious investor, it is better for you to watch from the sidelines for now and wait for the company to take additional steps towards profitability. But if you can accept some risk and are looking for a potential growth story, consider picking up some shares of SoundHound today — to get your hands on this promising AI player as soon as possible.
Should you invest $1,000 in SoundHound AI now?
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Adria Cimino has no position in any stocks. The Motley Fool has no positions in any of the stocks mentioned. The Motley Fool has a Disclosure Policy.
According to Wall Street, this artificial intelligence (AI) stock could rise 70 percent. Time to buy? Originally published by The Motley Fool.