Voice AI company SoundHound AI surged again on Wednesday, the latest escalation in what appears to be a running battle between online cheerleaders for the stock and those betting that the run-up in the money-losing small-cap packaged-software firm must eventually bend to financial reality.
But the stock surge Wednesday — more than 20% at last glance — pushed the price past a remarkable milestone. Shareholders are now sitting close to a milestone of 1,000% gains in 2024. (It briefly hit that level in intraday trading before a somewhat hawkish rate cut from the Fed at 2 p.m.)
Over at the Reddit sub where SoundHound partisans gather, there are good feelings all around, as you might imagine, with one commenter claiming that their holding in the stock hit $1 million on today’s rally.
The current upsurge in the shares seemed to gather steam after a post over on WallStreetBets, in which a commenter laid out a pretty bearish case on the company and said they were shorting the stock, i.e. betting the shares would fall.
The argument largely centers on SoundHound’s August acquisition of enterprise-software company Amelia, which, the writer argues, is “a much shittier business than Soundhound, but it’s also ~2x its size from a financial perspective.”
“Soundhound’s financials will now be driven by the results of Amelia, and so too will the stock price,” they wrote in a post titled, “Here’s why I’m shorting Soundhound.”
On a strict valuation basis, it’s hard to argue that any SoundHound — at a price-to-next-12-months sales ratio of more than 50 — is anything but overvalued at the moment. But it’s also clear that careful valuation metrics are not something the markets are overly concerned about right now.
Ultimately this will get resolved one way or the other by financial results, but we won’t get another earnings update on the company until March, meaning online rhetoricians won’t have to incorporate any fresh facts into their arguments for awhile.
For those who are interested in hearing from the horse’s mouth about the prospects for SoundHound AI and learning about the company’s background, we spoke to CEO Keyvan Mohajer back in late October.
