Therefore, SoundHound AI has a lot of room for growth in the long term. But justifying its current valuation may be difficult even if it manages to grow at a faster rate than the market it serves. Let’s see why.

We’ve seen that SoundHound’s management expects the company’s 2025 revenue to reach $165 million. Assuming the company’s top line grows to a 40% CAGR through 2034, which is slightly higher than the rate at which its end market is expected to grow, SoundHound’s annual revenue could reach slightly more of 2 billion dollars.

Given that SoundHound’s growth could slow over the next decade as it becomes a more mature company, the market is likely to put a much smaller premium on its valuation than it does now. Assuming SoundHound trades at eight times sales after a decade, in line with the U.S. tech sector average, its market cap could rise to $16 billion (based on estimated 2034 revenue of $2,000 million dollars).

This would represent a 220% jump from current levels. While this may seem like a big deal at first, investors should note that the projected market capitalization after a decade indicates that SoundHound stock could deliver annual gains of 12% over that period. Buying SoundHound stock at its currently expensive valuation for these earnings doesn’t seem like a lucrative bet when we consider that the Technology Sector Nasdaq-100 The index has seen faster growth over the past decade.

Additionally, SoundHound’s one-year price target of $12.36, according to Yahoo! Finance, is lower than the current stock price. This suggests that analysts covering SoundHound believe the stock may have pulled ahead after its strong rally in 2024.

And finally, SoundHound’s recent decline hasn’t made it attractive enough to buy, which is why investors would do well to look now at other AI stocks that are trading at much more attractive levels and are on track to ‘take advantage of the large quantities that can be addressed. opportunities

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They drive hard has no position in any of the stocks mentioned. The Motley Fool has positions and recommends Nvidia. The Motley Fool has one disclosure policy.

Is SoundHound AI Stock a Buy Now? was originally published by The Motley Fool