SOUN Set to Report Q3 Earnings: Buy, Sell or Hold the Stock?

Earnings and Financial Performance - SoundHound AI (SOUN) is scheduled to report its third-quarter 2024 results on Nov 12, with a Zacks Consensus Estimate for revenues of $23.68 million, indicating a 78.47% growth from the year-ago quarter [1] - The consensus mark for loss is pegged at 8 cents per share, unchanged over the past 60 days, compared to a loss of 9 cents per share in the year-ago quarter [1] - SOUN's earnings beat the Zacks Consensus Estimate in one of the trailing four quarters, missed it twice, and met it once, with an average negative surprise of 5% [2] Growth Drivers and Market Opportunities - SOUN offers conversational intelligence through Voice AI solutions in 25 languages, benefiting from the growing demand for Generative AI and large language models [3] - The company's AI-driven customer service solutions, such as Smart Ordering, Employee Assist, and Smart Answering, cater to the restaurant and auto sectors, contributing to revenue growth [4] - Smart Answering has opened a massive market in customer service, boosting top-line growth [5] - SOUN had a $723 million cumulative subscriptions and bookings backlog at the end of Q2 2024, roughly doubling year-over-year, with an average duration of seven years [6] Stock Performance and Valuation - Year-to-date, SOUN shares have surged 227.8%, outperforming the broader Zacks Computer & Technology sector (31.1%) and the Zacks IT Services industry (14.2%) [7] - SOUN's forward 12-month Price/Sales ratio is 17.58, higher than its median of 15.33 and the Zacks Computer & Technology sector's 6.41 [8] Market Expansion and Strategic Moves - SOUN's addressable market is worth over $140 billion, spanning automotive, restaurants, customer service, entertainment, Smart TVs, and IoT devices [10] - The company has more than 270 patents, with over 155 granted and more than 115 pending [10] - In Q2 2024, SOUN's AI services were employed by existing restaurant customers like Jersey Mike's and new clients, including Beef 'O' Brady's, which launched SOUN's voice AI ordering system across corporate locations [11] - The global light vehicle auto market TAM is expected to grow from 88 million to 95 million units by 2028, while the restaurant market TAM is projected to grow from $3.3 trillion to $4.4 trillion by 2028 [12] - SOUN has expanded its footprint in the automotive industry by integrating its SoundHound Chat AI voice assistant with ChatGPT into vehicles across 11 European markets [13] - The company signed a new contract in Q2 2024, becoming the first to introduce ChatGPT-style capabilities to in-vehicle voice assistants in Latin America [14] - SOUN's acquisition of SYNQ3 in early 2024 strengthened its presence in the restaurant sector, while the acquisition of Allset's key assets enhanced its Voice AI capabilities [15] - The acquisition of conversational AI leader Amelia is expected to create a combined clientele of roughly 200 marquee customers, with earnings accretion anticipated by the second half of 2025 [16] Conclusion - SOUN is well-positioned to benefit from the strong TAM of global automotive and restaurant markets, driven by its innovative portfolio [17]