‘Stay Realistic,' Says Piper Sandler About SoundHound AI Stock

Business Insider

a day ago

SoundHound AI (NASDAQ:SOUN) stock has benefited from growing excitement around voice-enabled AI, surging 156% over the past year. However, that momentum may have outpaced the company's ability to deliver in the near term.
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While the long-term thesis remains intact, Piper Sandler analyst James Fish has recently stepped back from his bullish stance. His concerns now center on execution timing, the pressure to achieve profitability, and the challenge of balancing growth investments with delivering near-term performance.
These concerns carry more weight given where SoundHound is headed. The company is in the midst of a shift from one-time auto and royalty revenues to a more stable, subscription-driven model. It's a promising direction, but one that also raises the stakes. Subscription businesses depend on consistent execution, efficient sales strategies, and upfront investment, and any missteps can quickly slow momentum.
That's why Fish, while optimistic about SoundHound's tech – particularly its integration of automatic speech recognition (ASR) with natural language understanding (NLU) – argues that the company needs to step up its go-to-market efforts. Without stronger investment in sales and distribution, the transition to a recurring revenue model could fall short of its potential.
That caution has deepened in recent months, as several key risks have come into focus. For one, the company's 2H25 outlook already assumes solid execution across all three pillars, but delays are becoming more likely. Deals expected to close this year may now slip into 2026. Meanwhile, SoundHound is trying to balance the pursuit of profitability with continued investment in Amelia's growth, an increasingly difficult juggling act. Even if Amelia performs well, it could trigger higher earn-outs and lead to increased dilution. Combined with a valuation above 20x 2026 estimates, which already bakes in strong performance, these dynamics significantly raise the stakes for hitting second-half targets.
Supporting these concerns, Fish's 1H25 CIO Survey found strong interest in Voice AI, but only 17% of respondents indicated plans to engage with standalone vendors like Amelia – a signal that broader adoption may be slower than anticipated. Moreover, recent checks in both the CX and Amelia segments revealed limited traction, growing competitive pressure, and a lack of major customer wins. Compounding that, SoundHound's automotive growth depends on a robust 2H ramp-up, yet macroeconomic headwinds may limit sales and production across the sector.
'We remain constructive on the long-term opportunities, and 2H25 execution could create a squeeze on shares, but fundamentally, we see a balanced risk-reward here,' Fish summed up.
As a result, Fish downgraded SoundHound shares from Overweight (i.e., Buy) to Neutral, while maintaining a $12 price target, implying a ~6% downside from current levels. (To watch Fish's track record, click here)
That's one cautious take – but what does the broader Street think? 3 other analysts join Fish on the sidelines, and with an additional 3 Buy ratings, SOUN carries a Moderate Buy consensus. However, the $11.50 average price target implies a potential 10% downside over the next 12 months. (See SOUN stock forecast)
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