Voice Control Innovator Actions AI SoundHound (NASDAQ:SON) came to life in the spring of 2024, when artificial intelligence (IA) giant Nvidia (NASDAQ: NVDA) unveiled a rare investment in the stock. But this surge did not last. On July 1, SoundHound AI’s stock price was 56% below its peak in early March.
I don’t see any reason to despair about SoundHound AI’s recent price drop, though. On the contrary, it’s a welcome price correction that gives growth investors a chance to pick up some shares at a low price.
What SoundHound AI does
SoundHound AI is a solution for voice AI and conversational intelligence technologies, which are becoming as crucial as Wi-Fi in a coffee shop. Many companies are exploring this space, but SoundHound AI started building a unique technology platform at a time when smartphones were still new and fresh. Its voice analysis is based on advanced AI tools, refined over the years through billions of song identifications and interactions with phone menus.
And it’s more than just a tech demo. SoundHound AI has a backlog of long-term contracts worth $682 million, with loyal customers ranging from automakers and consumer electronics giants to restaurant chains and customer service call centers.
That’s a lot of contract promises waiting to be turned into revenue, and the market seems to be falling asleep on that fact. SoundHound AI’s stock price should start to rise as the backlog is converted into real revenue streams.
SoundHound AI’s Strategic Moves
The company isn’t resting on its laurels either. In fact, SoundHound AI has been busy rolling out some potentially game-changing measures over the past few months.
On June 10, SoundHound AI repaid the remaining $100 million in debt. This saved the company more than $55 million in interest and fees, freeing up $14 million in tight cash. With $180 million in cash and no debt, the company is poised to pursue new opportunities.
Less than two weeks later, on June 20, the company acquired key assets of Allset, an online ordering platform. It’s a strategic bet to build a voice-powered e-commerce empire. Imagine ordering your favorite cheeseburger by simply talking to your car or speaking to your smart TV from your couch. SoundHound AI’s voice-ordering capability combined with Allset’s restaurant expertise gives consumers a whole new set of options for easily grabbing wings or pizza slices.
Finally, on June 27, SoundHound AI converted all of its preferred stock to common stock. This isn’t a huge change, as the 475,000 preferred shares are a drop in the bucket compared to the 217 million Class A shares. Still, the move simplifies the company’s capital structure and eliminates the preferred stock. It also eliminates the requirement to pay quarterly dividends to preferred shareholders, which totaled $343,000 in the most recent quarter. That’s helpful for a small company that’s hungry for cash to fuel its long-term growth ambitions.
Why SoundHound AI is a Smart Buy Right Now
Yes, SoundHound AI is still unprofitable, and its valuation ratios might make you raise an eyebrow. The stock trades at 25.3 times revenue, and earnings-based ratios make no sense. But with a nearly $700 million order book and strategic moves that would make a chess grandmaster proud, its future looks bright. SoundHound AI’s recent actions show that it’s serious about growth and has the financial wherewithal to support it.
Sure, there may be some bumps along the way, but the upside potential is worth it. SoundHound AI’s innovative voice technology and large order book suggest this is just the beginning of its growth. For those who enjoy a thrill and can handle a few twists and turns along the way, SoundHound AI could be your ticket to impressive returns. And the nearly 50% price drop looks like an invitation to buy the stock today.
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Anders Bylund has positions in Nvidia and SoundHound AI. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.
1 Growth Stock Down 56% To Buy Right Now was originally published by The Motley Fool
