SOUN

Why SoundHound AI Stock Soared 34.6% Higher Last Month

After shaking off a steep drop in October, SoundHound AI (NASDAQ: SOUN) delivered a 34.6% gain in November 2023, according to data from S&P Global Market Intelligence. Is this voice-control specialist the dark horse of the artificial intelligence (AI) industry?

The company posted solid third-quarter results and launched new voice-controlled services for the restaurant sector. These mildly positive news items were enough to make investors forgive SoundHound for October's 20.9% drop. The stock rose 6.5% across the two months, exactly in line with the S&P 500 index's returns over the same period.

Tuning in to SoundHound's news

SoundHound AI's Q3 sales rose 19% year over year to $13.3 million. Adjusted net losses shrunk from $0.15 to $0.09 per share. Your average analyst had expected a net loss of $0.09 per share on revenue near $12.8 million, so the company met or exceeded Wall Street's expectations. The stock had already posted a 9% November gain at that point, but the report gave SoundHound's chart another boost.

One week later, investors had cautiously embraced the financial update, driving share prices another 20% higher in the process. At that point, SoundHound introduced a brand new voice-assist system for restaurant employees, intended to give everyone easy access to important information.

With the SoundHound Employee Assist tool, chefs and servers alike can pull up recipes, ingredient information, holiday opening hours, and more with a quick voice command. The system is optimized to work in noisy environments such as a bustling restaurant, and the AI system can deliver this info to the worker's earpiece when the normal conversation sounds like a data request.

SoundHound is updating its recipe for success

The automotive industry has been SoundHound's favorite market in recent years, with a large and growing stable of partners integrating the Houndify voice-control platform into their in-car experiences. These days, the company is leaning into restaurants in a big way. Freshly baked contract wins include giants like Krispy Kreme and White Castle. On November'searnings call CEO Keyvan Mohajer teased a new trial agreement with "one of the largest global quick-sell restaurants in the world."

This spicy little company is going places. Still tiny in terms of quarterly sales, SoundHound is building a substantial footprint in a couple of enormous target markets. Meanwhile, the stock may have posted a juicy gain last month, but it still trades at the bargain-bin valuation of 2.1 times trailing sales.

It's alright if you don't want to bet big money on an unprofitable AI expert like SoundHound. Still, if you can stomach negative earnings in this risky but important era of customer acquisition and early sales growth, SoundHound's stock is worth a second look.

Should you invest $1,000 in SoundHound AI right now?

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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.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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