SoundHound AI (SOUN 5.77%) stock saw a substantial pullback following the release of its fourth-quarter earnings results last week, but one Wall Street analyst thinks this price drop offers a buying opportunity. Investment bank H.C. Wainwright's analyst Scott Buck published a note on the company on March 4 and reiterated a "buy" rating on the stock.
In addition to maintaining a "buy" rating, Buck also raised his one-year price target on the stock from $5 per share to $7 per share. With SoundHound stock currently trading at roughly $5.25 per share, hitting the analyst's target would imply a potential upside of 33%.
Should investors be buying the audio-technologies specialist's shares on the heels of the recent valuation pullback?
While Buck wasn't effusive about SoundHound's Q4 results, the analyst thinks that the company's growth targets will help push the company's share price higher. After posting revenue of $45.9 million in 2023, management expects revenue to come in between $63 million and $77 million in 2024. If the company were to hit the midpoint of its guidance range, that would mean growing sales by 53%.
With its recent earnings report, SoundHound also stated that it expects to record more than $100 million in sales in 2025. Using the company's midpoint guidance for 2024, that would suggest annual sales growth of more than 43% next year.
With its current valuation, SoundHound AI is valued at roughly 22 times this year's expected sales. On the other hand, the company said that it closed out last year's final quarter with a service and order backlog of $661 million.
SoundHound stock is now down roughly 33% from its 52-week high, but the stock remains a highly speculative investment.
For highly risk-tolerant investors looking to chase momentum and potentially explosive plays in the AI space, taking a dollar-cost averaging approach to the stock could be worthwhile. However, the speculative nature of the company's valuation and performance outlook means that those who are less willing to take on risk should pursue other artificial intelligence plays.
