SoundHound's Week in Review: Earnings Uncertainty & Valuation Questions

Core Viewpoint - SoundHound AI (SOUN) has experienced a significant decline in stock value, dropping 51% over the past year and 13% last week, raising concerns about its path to profitability ahead of its upcoming earnings report on February 26, 2026 [1]. Performance Summary - SoundHound's stock fell 12.85% this week, closing at $7.46, while the S&P 500 gained 11.81% over the same period [1]. - The company's year-to-date decline stands at 25.18%, contrasting with the S&P 500's flat performance [1]. - SoundHound has a market cap of $3.13 billion with trailing twelve-month revenue of $148.4 million, resulting in a price-to-sales ratio of 21x, indicating high growth expectations [1]. Storyline One: Earnings Uncertainty - The upcoming Q4 2025 earnings report is expected to show sales of $53.88 million, up from $42.05 million in the previous quarter, with an adjusted EPS forecast of -$0.10 [1]. - If the company meets or misses these expectations, further selling pressure may occur [1]. Storyline Two: Insider Selling - On December 22, 2025, six executives sold shares at $11.2769, including CEO Keyvan Mohajer, who sold 144,326 shares for approximately $1.6 million [1]. - There have been no open market buys recorded in the past three months, with 10 sales, indicating a cautious sentiment among insiders [1]. Storyline Three: Competitive Valuation - SoundHound competes with larger tech companies like Alphabet, which trades at 9.3x sales with a profit margin of 32.8%, while SoundHound's valuation assumes it can maintain its niche against competitors [1]. - Wall Street estimates a -$55 million EBITDA for 2026, necessitating significant margin improvements or scale to achieve profitability [1]. - Analysts have set an average price target of $16.31, suggesting over 100% upside potential if the company can execute effectively [1].