SoundHound AI (SOUN) was up more than 292% leading into its Q4 earnings day Thursday. Anticipation was high, as is the case for any AI company these days. The conversational AI company did not deliver, though.

Shares have taken a step back in Friday’s trading session. SOUN fell as much as 24% but has recovered to a loss of 11% as of 11 AM EST.

Revenue of $17.1 million blew the previous high out of the water and signified 80% growth year over year. Still, it fell short of the $17.7 million consensus that analysts were expecting.

More importantly, though, the company is bleeding money. It lost $18 million in the fourth quarter, or 7 cents a share. This was a big improvement from this time last year, though, when SoundHound posted a $30.9 million loss. 

On an adjusted basis, this worked out to a fourth-quarter loss of $3.7 million, again, improving from the $18.8 million adjusted loss last year. That being said, the expectation was that the company would only lose $1 million on an adjusted basis.

The key takeaway? SoundHound is not growing at the pace that analysts and investors thought it would, even though its progress has been substantial. Still, Chief Executive Keyvan Mohajer says the company’s speed and agility have positioned it at the forefront of the AI trend when it comes to delivering tangible commercial value.

The company is optimistic about the year ahead and its longer-term growth prospects, too. SoundHound is forecasting fiscal 2024 revenue of $63 million to $77 million. This is relatively in line with what analysts are looking for.

Further down the road, though, the company sees the $100 million revenue target as attainable in 2025, which is what analysts are expecting as well. This is also the timeline in which the company should be delivering a positive adjusted EBITDA.

That being said, should you continue exercising patience with SOUN if you currently hold shares? Is this a good time for new investors to get into the stock after it took a dip? We’ve taken a look through the VectorVest stocks software and have 3 things you need to see to make a clear, confident decision either way.

SOUND Has Very Poor Upside Potential and Poor Safety, But Excellent Timing

VectorVest is a proprietary stock rating system that tells you what to buy, when to buy it, and when to sell it. It saves you time and stress while empowering you to win more trades.

The system is comprised of 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on its own scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy.

The best part? You’re given a clear buy, sell, or hold recommendation based on the stock’s overall VST rating. As for SOUN, here’s what we’ve found:

  • Very Poor Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. It offers way better insight than a simple comparison of price to value alone. The RV rating of 0.12 is very poor for SOUN.
  • Poor Safety: The RS rating is a risk indicator. It’s derived from a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. SOUN has a poor RS rating of 0.64.
  • Excellent Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s taken day over day, week over week, quarter over quarter, and year over year. This is where things get interesting, as the RT rating of 1.83 is excellent for SOUN.

The overall VST rating of 1.20 is good for SOUN, but not enough to earn the stock a buy. It’s currently rated a HOLD in the VectorVest system. Learn more about this opportunity with a free stock analysis today!

Want These Types of Insights at Your Fingertips so You Can Win More Trades?

Use VectorVest to analyze any stock free. VectorVest is the only stock analysis tool and portfolio management system that analyzes, ranks and graphs over 18,000 stocks each day for value, safety, and timing and gives a clear buy, sell or hold rating on every stock, every day.

VectorVest advocates buying safe, undervalued stocks, rising in price. SOUN rallied 292% leading into its Q4 earnings, at which point it dipped back down. The company fell short of analyst expectations but sees impressive growth on the horizon. While the stock does have excellent timing, it's being held back by poor safety and very poor upside potential. 

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