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Cantor Fitzgerald reiterated an Overweight rating on SoundHound AI Inc (NASDAQ:SOUN) and raised their 12-month price target on the stock to $6.20 (From $2.80) after the company participated in a Next-Gen Conversational AI panel at Cantor Fitzgerald’s 2023 technology conference, where the company was represented by CFO Nitesh Sharan.
The analyst wrote in a note, “In our view, SoundHound is uniquely positioned to take advantage of what we coin the “AI Revolution” given its large data set and best-in-class voice AI capabilities. As businesses around the world are looking to maximize sales and reduce cost, replacing human labor with voice assistants that have no problem upselling, never get tired, distracted, and never miss a day’s work, the addition of AI to the labor force is more appealing today than it has ever been. While we would argue this use case has been the apex of voice assistants since the technology first hit the scene more than two decades ago, recent advancements of language learning models have revived the urgency to deploy this technology. After spending a decade developing what we believe is best-in-class voice AI capabilities, we believe SoundHound is one of the few companies that can take advantage of the AI frenzy currently occurring at every business across the globe.”
SoundHound’s current core business revolves around the integration of its technology into vehicle infotainment systems. However, Knoblauch is optimistic about the company’s potential for significant market expansion. Cantor Fitzgerald believes that SoundHound is on the verge of venturing into new territories, broadening its reach and addressing a larger market.
For example: In August 2020, SoundHound launched an AI Powered Drive Through solution, which can be used to replace employees who typically work in a drive-thru, and given it is multi-modal, it will also help improve speed of ordering inside the restaurant at the counter.
Cantor Fitzgerald forecasts SoundHound to grow revenue to $115.1m in 2025E from $31.1m in 2022, representing a CAGR of 54.6%.
After burning ~$95m in FCF in 2022, management anticipates the company will reach adjusted EBITDA positive 4Q23E, implying cash burn exiting 2023 will be substantially improved, with the possibility that SoundHound could generate positive FCF in 2024E.
Shares of the company are up 9.8% in afternoon trading on Thursday.
