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Investing.com -- Ladenburg Thalmann raised its rating on SoundHound AI (NASDAQ:SOUN) to Buy from Neutral after the voice artificial intelligence company posted second-quarter revenue well above expectations, driven by large contract wins in automotive, restaurants and enterprise.
Revenue rose to $42.7 million, topping the brokerage’s forecast of $33.6 million, helped by a major automotive deal in China, an enterprise order from a large quick-serve restaurant customer, and a new enterprise client in financial services through a channel partner.
Adjusted EBITDA was a loss of $14.3 million, narrower than consensus estimates.
Ladenburg said momentum in core verticals is offsetting earlier concerns about low-margin contracts from the Amelia acquisition, which it expects to phase out over the next 18 months.
The company’s installed base now exceeds 14,000 restaurants, including seven of the top 20 U.S. chains, and three major U.S. automakers have rolled out vehicles with its embedded conversational AI.
The brokerage said SoundHound is building a broader platform that could link automotive, restaurant and enterprise customers into a voice-enabled ecosystem, creating new lead-generation revenue streams.
It forecast revenue of more than $270 million in 2027 with double-digit adjusted EBITDA margins, and raised its price target to $16 from $9. That is a 22x multiple on its estimate.
“We realize that this multiple is high and on a long time horizon forecast. That said, we think the company is building a true platform, and that valuation concerns will recede over time as the company’s growth story plays out,” analyst said.