SoundHound AI (NASDAQ:SOUN) stock jumped on Feb. 26 as the frenzy for artificial intelligence (AI) continued.
Shares rose 46% during the trading session and another 25% overnight. This means stock that traded at $4/share early yesterday was selling for over $7 as the market opened this morning. The market cap that was under $1 billion a week ago is now at $1.7 billion.
Stop, Children, What’s That Sound?
There was no company-specific news to explain the run-up. Other AI-related issues like C3.ai (NYSE:AI), which reports earnings on Ferb. 28, also rose sharply.
SoundHound is a voice recognition company that began selling to car companies. It is now building a niche in restaurants and call centers, where it can take calls and interact with customers even through the busiest periods. Nvidia (NASDAQ:NVDA) recently made an investment in it after backing an early capital raise of $75 million in 2017.
SoundHound is also due to report earnings on Feb. 29. Analysts are looking at revenue of $17.75 million. They are also looking closely at EBITDA, a statistic beloved by those considering a takeover.
The run-up, however, means SoundHound will have to beat estimates to stay strong. The company had revenue of just $38 million last year, and current estimates point toward revenue of $100 million this year. But hitting the number means you’re now paying 17 times revenue for the stock.
Still, if the company’s estimate of a $160 billion addressable market is right, and the numbers show SoundHound with a leading position, the stock could take off. Tipranks shows three analysts covering SOUN stock, all with buy recommendations, but the shares are already $2 ahead of the analysts’ price targets. Traders at Stocktwits are almost uniformly bullish.
SOUN Stock: What Happens Next?
As with Nvidia a week ago, watch those numbers. A solid beat could send SoundHound roaring ahead. A shortfall could be a buying opportunity.
As of this writing, Dana Blankenhorn had a LONG position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
