Wall Street Bulls Look Optimistic About SoundHound AI (SOUN): Should You Buy?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on SoundHound AI, Inc. (SOUN), and emphasizes the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank. Brokerage Recommendations - SoundHound AI has an average brokerage recommendation (ABR) of 1.33, indicating a consensus between Strong Buy and Buy, with 83.3% of the six recommendations being Strong Buy [2][3]. - Despite the positive ABR, the article cautions against making investment decisions solely based on this metric, as studies show limited success of brokerage recommendations in predicting stock price increases [3]. Analyst Bias - Brokerage analysts tend to exhibit a strong positive bias in their ratings, with five "Strong Buy" recommendations for every "Strong Sell" recommendation, which may mislead investors [4][8]. - The interests of brokerage firms may not align with those of retail investors, suggesting that the ABR may not provide reliable insights into future stock price movements [5]. Zacks Rank Comparison - The Zacks Rank, a proprietary stock rating tool, categorizes stocks from Strong Buy to Strong Sell and is based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [6][9]. - The Zacks Rank is distinct from the ABR, as it is a quantitative model that reflects timely changes in earnings estimates, while the ABR may not always be up-to-date [7][10]. Current Earnings Estimates - For SoundHound AI, the Zacks Consensus Estimate for the current year remains unchanged at -$0.36, indicating steady analyst views on the company's earnings prospects [11]. - The unchanged consensus estimate has resulted in a Zacks Rank of 3 (Hold) for SoundHound AI, suggesting caution despite the Buy-equivalent ABR [12].