SoundHound Share Price (NASDAQ:SOUN) Drops On Double Downgrade, Negative Commentary

SoundHound AI shares (NASDAQ: SOUN), a player in the burgeoning artificial intelligence sector, experienced a sharp decline during Thursday's trading session. The stock plummeted 15.76% in regular trading, and another 6.89% in the after hours session. This sell-off occurred in the wake of a disconcerting analyst double downgrade and a scathing report that questioned the company's competitive positioning. Are the comments fair? Let's take a look at what was said.

Cantor Fitzgerald analysts double downgraded SoundHound from ‘buy' to ‘sell,' completely bypassing the neutral ground and added some commentary that was not too well received by markets. They also set a one-year price target of $4.90 per share, down from their own previous mark of $5.80. The higher of the two marks set by Cantor Fitzgerald is still some way below the current price of $6.22, even after the stock wobbled. Without other clear fundamental changes to shift momentum, it can be said that this has significantly dampening the market's outlook on the stock.

Comments delivered alongside the downgrade indicate they feel the current valuation is “difficult to justify”, and believes that the market has not found the “true valuation” of SoundHound stock.

Amplifying the negative sentiment, Capybara Research published a critical report that characterized SoundHound's Houndify product as “a commodity with unremarkable technology”, and a company that it believes may be “misleading investors about their AI capabilities”. These are very strong words indeed. The same firm confirms that it is short on SOUN, and believes the shares are “worth $1 per share or less”.

You always have to look at both sides of the coin when evaluating a company, and a firm that is short a stock does not want to see upside momentum on a stock already up more than 220% YTD but without knowing when their position was taken, you have to take the comments for what they are, market commentary and an opinion to be considered in the wider sense.

Despite the stark downturn observed on Thursday, SoundHound shares have been performing notably well over the year, and over the past month remain 68.2% in the green despite the pullback. Such a surge has propelled the company into the spotlight as one of the most volatile AI stocks on the market and pullbacks are to be considered as healthy whilst a new value is found.

On the financial front, the previous year's fourth-quarter earnings painted a brighter picture. SoundHound saw revenues skyrocket by 80.48% and projects a healthy 53% revenue increase for the current fiscal year. Adding to this positive trajectory, the company ended with a robust backlog of bookings and subscriptions totalling $661 million, a beacon of potential future growth.

Despite these indicators of expansion, SoundHound AI is still navigating through losses, underpinning the risks associated with its stock. The uncertainties that loom over its path to profitability make it a dicey proposition for investors who weigh stability heavily in their investment decisions. Next SOUN earnings are scheduled for May 9th, and will make for an interesting read on the fundamental side.

In the backdrop of the recent events SoundHound stock might be one of the more volatile stocks around at present, following huge swathes of excitement with some sharper analyst tones. The recent trend has been nothing short of remarkable, but it is always prudent to take a little look under the hood as it were to make sure everything is as you would like it to be.