Are you ready for a rollercoaster ride in the stock market? SoundHound AI (NASDAQ: SOUN) investors have experienced just that this year. The stock started off with a 23% loss but then skyrocketed with a 323% gain by March 15, only to lose half its value later. Despite the ups and downs, the stock is still up 112% since the beginning of the year.
One Wall Street analyst sees the recent decline in SoundHound AI stock as a positive development. Cantor Fitzgerald analyst Brett Knoblauch upgraded the stock to neutral (hold) from underweight (sell) and maintained a price target of $4.90, representing a potential 10% upside compared to the closing price on Wednesday.
Are the Risks Worth it?
Knoblauch had previously downgraded SoundHound AI due to concerns about its high valuation and other risks. While the valuation has since contracted, the analyst still believes there are significant risks associated with the stock, including an opaque operating model, inadequate capital spending, and potential customer losses.
Moreover, the company’s admission of “material weaknesses in its internal control over financial reporting” and the subsequent restatement of financial statements are red flags that investors should take note of. Additionally, changes to how SoundHound AI accounts for its backlog raise further questions about the company’s financial health.
Even with the recent retracement in the stock price, SoundHound AI is still trading at 22 times sales without generating a profit. Investors should proceed with caution when considering this volatile stock.
Should You Invest in SoundHound AI?
Before jumping into SoundHound AI, it’s essential to weigh the risks and potential rewards carefully. While the stock may have room to run, there are several factors that investors need to consider. The Motley Fool Stock Advisor team, for instance, has highlighted the top 10 stocks they believe could deliver substantial returns in the coming years, with SoundHound AI not making the list.
Stock Advisor’s track record speaks for itself, with past recommendations like Nvidia yielding significant returns for investors. With expert guidance, regular updates, and new stock picks each month, Stock Advisor has outperformed the S&P 500 since 2002.
Investing in volatile stocks like SoundHound AI can be risky, so it’s crucial to do your research and carefully consider your investment strategy before making a decision.
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