It has been just over four years since SoundHound AI (SOUN -4.06%) made its stock market debut, and the voice artificial intelligence (AI) company's returns have been disappointing thus far, as it has gained just 28% during this period, as compared to the 45% gains clocked by the tech-heavy Nasdaq Composite.
What's worth noting is that wild stock price swings have been a common characteristic of SoundHound's journey on the market as a public company. The stock had a forgettable 2022 after its stock market listing, followed by a massive 1,000% jump in 2023 and 2024. This year, however, is turning out to be another woeful one for SoundHound investors, as the stock has lost nearly 52% of its value as of this writing.
The good part is that SoundHound seems capable of going on a bull run once again, replicating the impressive gains it clocked in 2023 and 2024 that were big enough to help it crush the broader market's returns. Let's look at the reasons why SoundHound stock could go on a market-beating run once again.
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SoundHound AI's eye-popping growth is here to stay for a long time
SoundHound AI offers conversational AI solutions such as voice-based AI agents, in-vehicle voice assistants, voice-based e-commerce, and voice-enabled AI chat assistants, among other things. Its solutions are deployed across multiple verticals such as restaurants, healthcare, contact centers, and connected devices.
The market that SoundHound serves is currently in a nascent state. Market research firm Imarc Group estimates that the conversational AI market was worth just over $13 billion last year. Its size is expected to jump by 11x through 2033, clocking a compound annual growth rate of 29%. SoundHound's growth in the past three years suggests that it is benefiting nicely from the end-market opportunity on offer.
As the chart indicates, the company's growth has picked up impressively in recent quarters.
SOUN Revenue (TTM) data by YCharts
This remarkable growth can be attributed to the company's rapid expansion in industries such as restaurants and automotive, where the adoption of voice-based AI solutions is growing at a nice clip.
SoundHound management pointed out in its first-quarter earnings report that its customers in the restaurant industry have been adding its voice AI-based answering and ordering solutions to more locations. The company is also expanding into new areas such as healthcare and retail. The robust adoption of SoundHound's solutions across multiple verticals is the reason why it reported impressive revenue growth of 151% in the first quarter.
Another thing worth noting is that SoundHound is building multiple revenue streams. It gets royalties from the usage of its solutions in automotive, smart TVs, and other connected devices, along with subscription revenue from applications such as food ordering and customer service. The company is looking to further monetize its offerings through advertisements.
Meanwhile, SoundHound's foray into the voice-based agentic AI market should ideally open another solid growth opportunity. The company recently announced its Amelia agentic AI platform through which customers can develop and deploy voice AI agents that can reason on their own and perform complex tasks.
The integration of AI in customer support is expected to jump by 20x over the next decade, with the market expected to generate more than $53 billion in revenue in 2034. This is another example of how SoundHound is going after lucrative opportunities in the conversational AI market that should help the company continue to grow at elevated levels in the long run.
A solid balance sheet should be a tailwind for the company
SoundHound AI has turned to acquisitions to bolster its position in the conversational AI market. Its latest acquisition was that of Amelia last year, which improved its presence in the customer service market in verticals such as retail, finance, insurance, and healthcare. Similarly, its previous two acquisitions of Allset and Synq3 shored up its presence in online ordering, connected devices, and restaurants.
It won't be surprising to see SoundHound making more acquisitions in the future, thanks to its healthy balance sheet. The company is almost debt-free and has a net cash balance of more than $240 million, which will come in handy if it decides to improve its presence further in the conversational AI space. As such, there is a good chance that SoundHound AI could become a much bigger company in the long run.
The company is expecting to almost double its revenue in 2025 to $167 million, which is much faster than the pace at which the conversational AI market is set to grow. Assuming SoundHound AI averages annual revenue growth of even 30% over the next five years, which will be almost in line with the projected growth of its end market, its top line could hit $583 million in 2030.
If SoundHound stock trades at even 15 times sales at that time, which would be a big discount to its current price-to-sales ratio of 34, its market capitalization could jump to $8.75 billion. That points toward a potential upside of 127% over the next five years based on its current market cap, which could be enough to help it beat the broader market's gains during this period.
