This billionaire just bought SoundHound stock: should you?

By:
on May 15, 2024
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  • SoundHound AI shares have jumped by over 50% from its lowest swing in April.
  • Seth Klarman’s Baupost has invested in the company for its AI role.
  • SoundHound wants to become a leading player in the automobile and restaurant industries.

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SoundHound AI (NASDAQ: SOUN) stock price is crawling back after tumbling hard between March and April when it moved from $10.25 to $3.52. It has now rebounded by 50% as investors buy the dip, giving it a market cap of over $1.7 billion.

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Seth Klarman invests in SOUN

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Seth Klarman, the billionaire founder of Baupost, is one of the investors buying SoundHound stock. Baupost is a leading value-oriented hedge fund with over $27 billion in assets under management. His other investments are in companies like Google, Qorvo, Viasat, and Fidelity National Information Services.

Klarman invested in SoundHound to take advantage of the growing artificial intelligence trend globally. The company provides technology that offers conversational experiences to customers in industries like automotive, hospitality, retail, and contact center. This is a big industry that is estimated to reach $160 billion by 2026.

SoundHound’s business is doing well as it continues to onboard new customers, which explains why Nvidia invested in the company. The most recent results revealed that its revenue rose by 73% to $11.6 million in the first quarter. 

This revenue growth came at a cost as its net loss jumped from $25 million in Q1’23 to $28.5 million in Q1’24. The management expects it to remain in the loss-making area for a while as it continues to ramp up its offerings and growing market share. 

Analysts believe that SoundHound’s growth will continue growing in the coming years. The average estimate is that its second-quarter revenues will jump by 66.6% to $13.43. It will then generate $70.6 million in revenues in 2024 followed by $103 million in 2026.

A key catalyst for SoundHound is its recent acquisition of SYNQ3 to boost its restaurant business. The company aims to become the biggest AI operator for restaurants as wage growth continues. 

Restaurants can replace their workers using its conversational AI tools and save millions of dollars each year. It also has a large partnership with Stellantis, the parent company of Jeep, Alfa Romeo, Fiat, and Vauxhall.

SoundHound stock price forecast

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SoundHound stock

SOUN chart by TradingView

Turning to the daily chart, we see that the SOUN share price has rebounded in the past few weeks. It has rallied above the crucial resistance point at $5.11, its highest swing in June 2023. The stock has also jumped above the key point at $4.98, its highest level in February last year.

It has jumped above the 50-day and 100-day Exponential Moving Averages (EMA) while the Relative Strength Index (RSI) has moved above the neutral point of 50. Therefore, the outlook for the stock is bullish, with the next point to watch being at $10, its highest swing in March

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