Since March, various factors have weighed on shares in AI voice technology company SoundHound AI (NASDAQ:SOUN). As a result, SoundHound AI stock has tumbled from over $10 per share, back down to prices just under $5 per share.
That’s not all. More volatility may lie ahead for SOUN. Given how investors have become more bearish about this speculative growth play, they may focus more on the negative aspects of the earnings release, rather than the positives.
However, you need not give up completely. Despite all the perceived negatives with SOUN, there are plenty of clear-cut positives still on its side. As one can still formulate a bull case for shares, at the very least, this stock is worth keeping an eye on.
SoundHound AI Stock and its Recent Rout
A few months back, SOUN was seemingly on course to experience a full rebound to prior price levels, yet as we noted above, this comeback was cut short. The reasons for this are manifold. For one, “AI mania” was waned considerably over the past two months.
More established AI stocks have stabilized, but the market remains very much cautious about riskier names in the space like SoundHound AI stock. Alongside this, a “short report” issued by short selling firm Capybara Research on March 19, has also soured sentiment for SOUN.
To make matters worse, SoundHound AI plans for a $150 million at-the-market equity offering. Just like with the “short report” news, the market reacted negatively to this development. That’s not surprising, as the resultant dilution from this offering will water down the value of shares held by existing investors.
Post-market on May 9, the company will release its latest quarterly results and updates to guidance. Again, this could drive the next round of high volatility for shares.
As we have pointed previously, SoundHound AI has a mixed earnings track record. Even if results are better-than-expected, investors could simply “sell on the news,” resulting in yet another drop for this hard-hit stock.
There’s Still Reason to Stay Bullish
There’s now plenty out there to build a bear case for SoundHound AI stock. Still, it’s not as if many of the positives surrounding shares have completely gone away. This includes the positives that contributed to SOUN’s run earlier this year.
In the “short report” on SoundHound AI stock, one key concern was the company’s loss of several high-profile customers over the past years. However, the recent gaining of a big ticket customer could counter these customer losses.
Per management, during the December quarter a “preeminent AI chip company” began to have a material impact on the company’s revenue.
While not certain, this “preeminent AI chip company” could be the same one revealed to be a SOUN investor. Not to mention, the AI chip leader collaborating with SoundHound to develop advanced in-vehicle AI voice technology.
Even as the market prematurely went bananas over this growing relationship, in time it may drive a level of growth sufficient enough to bring SoundHound AI to the point of profitability.
Alongside these positives, other factors bolster the bull case. Previously, we’ve noted a prime example. That would be increased use cases for SoundHound AI’s technology, such as its use in automating fast-food drive-thrus.
The Verdict: Keep an Ear Out for this AI Voice Innovator
Although expectations aren’t particularly high for SoundHound AI ahead of earnings, the market’s skeptical view of SOUN points to a negative reaction being more likely than a positive one.
However, if this results in another tumble for the stock, this could work to your advantage. At least, if you’re bullish that the many positives now sitting on the back burner will once again become top of mind.
The aforementioned “new customer” could become a greater contributor to revenue, as well as contribute to the development of a game-changing automotive voice AI product. The AI revolution could create even more use cases for SoundHound AI’s technology.
For now, keep an ear out for SoundHound AI stock. If shares encounter major weakness after earnings, feel free to buy.
SoundHound AI stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
