On Wednesday, SoundHound AI Inc. (NASDAQ: NASDAQ:SOUN) experienced a shift in its stock rating as Cantor Fitzgerald adjusted its view on the company. The firm upgraded the stock from Underweight to Neutral, while maintaining a price target of $4.90. The change in rating comes as a response to the recent performance of SoundHound AI's shares.
The analyst from Cantor Fitzgerald explained that the previous share weakness has led to a more reasonable valuation, though it remains high compared to the average software market value.
The software market is currently trading at approximately 7 times the expected 2024 enterprise value to sales ratio. This reassessment of risk versus reward in SoundHound AI's stock has prompted the firm to adjust its rating.
When Cantor Fitzgerald initially downgraded SoundHound AI, the firm believed that the risks of a downside were significantly greater than the potential for upside. Still, the current analysis suggests that the risks on both ends are now more balanced. This perceived equilibrium between potential gains and losses has been the catalyst for the firm's decision to upgrade the stock to a Neutral position.
The analyst's statement emphasized that the new rating reflects this revised outlook. Although the price target remains unchanged at $4.90, the upgrade signifies a shift in the firm's perspective regarding SoundHound AI's stock, aligning it with a more moderate stance.
Investors and market watchers will be observing SoundHound AI's performance in the context of this updated rating, as the company's stock continues to navigate the broader software market. The maintained stock price target of $4.90 will serve as a reference point for the stock's potential value in the eyes of Cantor Fitzgerald.
InvestingPro Insights
As SoundHound AI Inc. (NASDAQ: SOUN) captures the attention of analysts and investors with its recent rating upgrade, it's important to consider key financial metrics and expert insights that could influence the stock's trajectory.
According to InvestingPro data, SoundHound AI boasts a notable revenue growth of 47.36% over the last twelve months as of Q4 2023, with an even more impressive quarterly revenue growth of 80.48% in Q4 2023, signaling a strong upward trend in sales. Still, the company is currently trading at a high Price / Book multiple of 99.71, which could be a point of concern for value-focused investors.
InvestingPro Tips suggest that while analysts expect sales growth in the current year, there's a consensus that SoundHound AI will not be profitable this year. Additionally, the stock has experienced high price volatility, which may appeal to certain traders but could also indicate a higher risk profile.
Despite these challenges, the company's liquid assets exceed its short-term obligations, which could provide some financial stability.
For investors intrigued by SoundHound AI's potential, these insights can be further enriched with additional InvestingPro Tips available at https://www.investing.com/pro/SOUN. Use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and access the full range of expert analysis and tips, including 13 more tips for SoundHound AI that could guide your investment decisions.
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