Shares of SoundHound AI (NASDAQ: SOUN) turned sharply decrease Thursday, plunging as a lot as 13.6%. As of three:13 p.m. ET, the inventory was nonetheless down 11.4%.
The catalyst that drove the synthetic intelligence (AI) specialist decrease was a brief report and a uncommon double downgrade by a Wall Road analyst.
Price $1?
A brief report issued by Capybara Analysis titled “Lies, Damned Lies, and Cheeseburger ‘AI'” means that SoundHound AI is a “failing firm peddling lies and deception.” It additionally set a value goal of $1.
The report features a laundry listing of points. Amongst them, it suggests SoundHound’s voice recognition expertise is a commodity service that is not superior to comparable merchandise by Amazon‘s Alexa or Apple‘s Siri, amongst others. The report additionally cites a rising variety of buyer defections and SoundHound’s mounting losses, with “no clear path to profitability.”
Maybe essentially the most troubling problem is that the corporate’s backlog could also be deceptive. SoundHound just lately revised its definition, saying the subscription backlog “refers to potential income achievable,” so there isn’t any contractual obligation.
Maybe not coincidentally, analysts at Cantor Fitzgerald issued a uncommon double downgrade on the inventory right now to underweight (promote) from chubby (purchase). They set a value goal of $4.90, roughly 38% under Wednesday’s closing value.
The analysts say the valuation “can’t be justified,” whereas citing plenty of the identical dangers listed within the quick report. These embody the “opaqueness” of SoundHound’s working mannequin, slowing development, buyer losses, and rising competitors from bigger rivals.
Time to promote?
It is all the time been clear to me that SoundHound AI was a very dangerous inventory with no earnings and a excessive valuation. Whereas there’s potential, there’s additionally a honest diploma of threat and buyers ought to method the inventory with warning. Moreover, those that do not have a abdomen for threat and volatility is perhaps higher off promoting SoundHound AI.
Buyers should not essentially make investing selections primarily based on analysts’ opinions and quick studies. Nevertheless, if the claims made have advantage, buyers ought to take care and keep in mind the previous adage, “The place there’s smoke, there’s fireplace.”
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Why SoundHound AI Inventory Crashed on Thursday was initially revealed by The Motley Idiot
