SoundHound AI ( SOUN -1.02% ) has been one of the most hotly debated artificial intelligence (AI) stocks on Wall Street. It has swung wildly between less than $6 per share and more than $22 per share over the past 12 months. Today, the stock changes hands at about $7, putting it near the bottom of its 52-week range.
The question for investors is whether this dip is a buying opportunity or whether SoundHound AI is a once-trendy stock that has lost its luster.
The company's voice AI platform interacts with people via normal conversation, allowing them to talk to cars or digital devices, or have interactions with businesses without the need for a human employee on the other end of the line. There are big opportunities for those services, but there's also a lot of competition .
My prediction is that SoundHound AI stock will rise by roughly 25% over the next year or so. However, the path forward might remain volatile.
SoundHound AI is continuing to put up growth
Just a few years ago, SoundHound AI was doing less than $50 million in annual revenue. This year, Wall Street analysts estimate that it will reach $237 million in revenue.
NASDAQ : SOUN
The company built its name primarily in the automotive industry, providing in-vehicle voice assistants. But SoundHound AI has branched out into new industries including restaurants, hospitality, and customer service. Acquisitions have been a big part of that process, including its pending purchase of LivePerson at an enterprise value of about $250 million.
LivePerson is heavily involved in the customer service industry, and its existing client base includes 25 Fortune 100 companies. Assuming the deal closes, SoundHound AI's management believes the combined company could generate between $350 million and $400 million in revenue in 2027.
How high might the stock go? Here's your answer
Suppose SoundHound AI 2027 revenue lands at $375 million -- right in the middle of that guidance range.
Today, its market cap is $3.2 billion. That's about 8.5 times SoundHound AI's expected sales next year. If the stock goes nowhere between now and the end of 2027, the stock would trade near its lowest valuation over the past three years. In that context, I'd say it has some room for upside.
SOUN PS Ratio data by YCharts.
SoundHound AI isn't profitable, so investors should be careful about how high a valuation they bake into their expectations. That said, the company was much smaller and riskier back in early 2024. It shouldn't be a stretch for the stock to command a higher valuation if the business is performing well.
At 12 times 2027 revenue, SoundHound AI would have a market cap of about $4.5 billion. I'll even add $300 million to SoundHound AI's base market cap to account for new stock that it could issue between now and then. Even still, that would imply roughly 25% upside from a hypothetical $3.5 billion base value.
SoundHound AI stock has been highly volatile. But right now, it's hard not to like the setup for this stock, especially given that the company continues to impress.