SoundHound AI (NASDAQ:SOUN), a voice AI platform empowering businesses with conversational AI experiences, has recently experienced a significant stock decline, plummeting over 50% year-to-date to $10. A substantial portion of this drop occurred in January, largely due to disappointed investor expectations following the Consumer Electronics Show (CES). The stock has yet to see a meaningful recovery since then.
From a valuation perspective, SoundHound AI stock still appears overpriced. We believe there are several factors contributing to this unattractiveness, especially when considering its current high valuation. Our conclusion is based on a comprehensive comparison of SOUN’s current valuation against its recent operating performance and its current and historical financial health.
Our in-depth analysis of SoundHound AI, covering key parameters such as Growth, Profitability, Financial Stability, and Downturn Resilience, indicates that the company has demonstrated only moderate operating performance and financial condition. These factors collectively raise concerns about the stock’s current appeal. That said, if you seek upside with lower volatility than individual stocks, the Trefis High Quality portfolio presents an alternative – having outperformed the S&P 500 and generated returns exceeding 91% since its inception. On a separate note, see – Should You Buy CRWV Stock After A Whopping 4x Rise?
How Does SOUN Stock’s Valuation Look vs. The S&P 500?
Going by what you pay per dollar of sales or profit, SOUN stock looks very expensive compared to the broader market.
- SoundHound AI has a price-to-sales (P/S) ratio of 36.2 vs. a figure of 3.1 for the S&P 500
How Have SoundHound AI’s Revenues Grown Over Recent Years?
SoundHound AI’s Revenues have grown considerably over recent years.
- SoundHound AI has seen its top line grow at an average rate of 69.0% over the last 3 years (vs. increase of 5.5% for S&P 500)
- Its revenues have grown 101.4% from $51 Mil to $102 Mil in the last 12 months (vs. growth of 5.5% for S&P 500)
- Also, its quarterly revenues grew 151.2% to $29 Mil in the most recent quarter from $12 Mil a year ago (vs. 4.8% improvement for S&P 500)
How Profitable Is SoundHound AI?
SoundHound AI’s profit margins are considerably worse than most companies in the Trefis coverage universe.
- SoundHound AI’s Operating Income over the last four quarters was $-142 Mil, which represents a very poor Operating Margin of -139.2%
- SOUN Operating Cash Flow (OCF) over this period was $-106 Mil, pointing to a very poor OCF Margin of -103.8% (vs. 14.9% for S&P 500)
- For the last four-quarter period, SOUN Net Income was $-188 Mil – indicating a very poor Net Income Margin of -183.6% (vs. 11.6% for S&P 500)
Does SoundHound AI Look Financially Stable?
SoundHound AI’s balance sheet looks very strong.
- SoundHound AI’s Debt figure was $4.6 Mil at the end of the most recent quarter, while its market capitalization is $4.0 Bil (as of 6/16/2025). This implies a very strong Debt-to-Equity Ratio of 0.1% (vs. 19.4% for S&P 500). [Note: A low Debt-to-Equity Ratio is desirable]
- Cash (including cash equivalents) makes up $246 Mil of the $588 Mil in Total Assets for SoundHound AI. This yields a very strong Cash-to-Assets Ratio of 41.8%
How Resilient Is SOUN Stock During A Downturn?
SOUN stock has fared much worse than the benchmark S&P 500 index during some of the recent downturns. While investors have their fingers crossed for a soft landing by the U.S. economy, how bad can things get if there is another recession? Our dashboard How Low Can Stocks Go During A Market Crash captures how key stocks fared during and after the last six market crashes.
Inflation Shock (2022)
- SOUN stock fell 93.6% from a high of $14.98 on 5 May 2022 to $0.97 on 22 December 2022, vs. a peak-to-trough decline of 25.4% for the S&P 500
- The stock fully recovered to its pre-Crisis peak by 6 December 2024
- Since then, the stock has increased to a high of $24.23 on 26 December 2024 and currently trades at around $9.70
Putting All The Pieces Together: What It Means For SOUN Stock
In summary, SoundHound AI’s performance across the parameters detailed above are as follows:
• Growth: Extremely Strong
• Profitability: Extremely Weak
• Financial Stability: Extremely Strong
• Downturn Resilience: Extremely Weak
• Overall: Neutral
Even though SoundHound AI shows a neutral performance in the areas we analyzed, its extremely high valuation makes the stock unattractive, in our view.
Of course, we could be wrong; investors might be willing to pay such a high valuation multiple for SOUN stock given its aggressive revenue growth, supported by its Amelia acquisition. However, the risk at these levels appears high. In fact, we apply risk assessment framework while constructing Trefis High Quality (HQ) Portfolio which, with a collection of 30 stocks, has a track record of comfortably outperforming the S&P 500 over the last 4-year period. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride as evident in HQ Portfolio performance metrics.
Read the full article here
