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On Thursday, H.C. Wainwright adjusted its price target for SoundHound AI Inc. (NASDAQ:SOUN), increasing it to $8.00 from the previous $7.00, while maintaining a Buy rating on the company's shares. This change follows SoundHound AI's announcement of its third-quarter financial performance for 2024, which was released after the market closed on November 12.
The tech firm reported quarterly revenue of $25.1 million, surpassing the forecasted $22.6 million. This achievement was attributed to organic demand growth and contributions from recent mergers and acquisitions.
In response to the heightened business demand, highlighted by successful cross-selling and up-selling strategies, SoundHound's management has revised its revenue projections upward for the fourth quarter of 2024 and the full year of 2025.
SoundHound AI anticipates 2025 revenues to be between $155.0 million and $175.0 million, representing a 95% increase at the midpoint compared to 2024. The company aims to maintain a balance between revenue growth and expense control, which is expected to lead to positive adjusted EBITDA by the fourth quarter of 2025.
The company's financial health was also noted, with a robust cash position of $135.6 million and minimal debt, providing flexibility for future organic growth initiatives or potential mergers and acquisitions. Despite these positive developments and the company's optimistic outlook, SoundHound AI's stock experienced a 17.1% decline in Wednesday's trading session, contrasting with a 0.9% decrease in the Russell 2000 index.
The report concluded with the expectation that SoundHound AI will continue to execute its strategy in the upcoming quarters, focusing on revenue growth, gross margin expansion, and the pursuit of positive adjusted EBITDA. The analyst suggested that these factors, coupled with ongoing demand for AI companies, should attract investor interest and contribute to an upward trajectory in the company's share price.
InvestingPro Insights
SoundHound AI's recent financial performance and future outlook align with several key insights from InvestingPro. The company's revenue growth of 89.13% in Q3 2024 supports the analyst's positive view on its execution strategy. This growth trend is expected to continue, as one InvestingPro Tip indicates that analysts anticipate sales growth in the current year.
Despite the recent stock price decline mentioned in the article, InvestingPro data shows a strong return of 20.81% over the last month and 25.9% over the last three months. This suggests that investors are still optimistic about SoundHound AI's potential, possibly due to its AI-focused business model and growth prospects.
The company's financial health, highlighted in the article, is reinforced by an InvestingPro Tip stating that SoundHound AI holds more cash than debt on its balance sheet. This solid financial position supports the company's ability to invest in growth initiatives and potential acquisitions.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for SoundHound AI, providing a deeper understanding of the company's financial position and market performance.
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