SoundHound AI, Inc. (NASDAQ:SOUN) Released Earnings Last Week And Analysts Lifted Their Price Target To US$4.23

There's been a major selloff in SoundHound AI, Inc. (NASDAQ:SOUN) shares in the week since it released its full-year report, with the stock down 30% to US$2.21. Revenues of US$31m were in line with expectations, although statutory losses per share were US$0.73, some 12% smaller than was expected. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

See our latest analysis for SoundHound AI

Taking into account the latest results, the consensus forecast from SoundHound AI's three analysts is for revenues of US$45.9m in 2023, which would reflect a major 48% improvement in sales compared to the last 12 months. Losses are predicted to fall substantially, shrinking 50% to US$0.29. Yet prior to the latest earnings, the analysts had been forecasting revenues of US$46.0m and losses of US$0.29 per share in 2023.

The consensus price target rose 14% to US$4.23, with the analysts increasing their valuations as the business executes in line with forecasts. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. The most optimistic SoundHound AI analyst has a price target of US$5.00 per share, while the most pessimistic values it at US$3.20. This shows there is still a bit of diversity in estimates, but analysts don't appear to be totally split on the stock as though it might be a success or failure situation.

Looking at the bigger picture now, one of the ways we can make sense of these forecasts is to see how they measure up against both past performance and industry growth estimates. It's clear from the latest estimates that SoundHound AI's rate of growth is expected to accelerate meaningfully, with the forecast 48% annualised revenue growth to the end of 2023 noticeably faster than its historical growth of 35% p.a. over the past three years. Compare this with other companies in the same industry, which are forecast to grow their revenue 12% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect SoundHound AI to grow faster than the wider industry.

The Bottom Line

The most important thing to take away is that the analysts reconfirmed their loss per share estimates for next year. Fortunately, they also reconfirmed their revenue numbers, suggesting sales are tracking in line with expectations - and our data suggests that revenues are expected to grow faster than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

With that in mind, we wouldn't be too quick to come to a conclusion on SoundHound AI. Long-term earnings power is much more important than next year's profits. We have forecasts for SoundHound AI going out to 2024, and you can see them free on our platform here.

We don't want to rain on the parade too much, but we did also find 3 warning signs for SoundHound AI (2 are a bit concerning!) that you need to be mindful of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.