Piper Sandler has thrown its weight behind voice AI technology leader SoundHound AI (NASDAQ:SOUN), initiating coverage with an Overweight rating and a $12 price target that suggests significant upside from recent trading levels.
In their analysis, Piper Sandler analysts James Fish and Caden Dahl emphasized SoundHound's strategic position in the AI landscape. "With its voice-AI platform, SoundHound is a direct play on the AI revolution," the analysts noted, pointing to the company's combined Automatic Speech Recognition (ASR) and Natural Language Processing (NLP) architecture as a key competitive advantage.
The timing of this coverage comes as SoundHound reported exceptional growth in Q1 2025, with revenue soaring 151% year-over-year to $29.1 million. The company maintains a strong financial position with $246 million in cash and no debt, positioning it well for continued expansion.
SoundHound's technology spans multiple sectors, with particularly promising opportunities in quick-service restaurants (QSRs) and customer experience (CX). The company's 2024 acquisition of Amelia has enabled it to enter the conversational AI space for contact centers, which Piper Sandler estimates will be a $30 billion addressable market by 2027. Overall, analysts project a $47 billion serviceable opportunity across all use cases by 2027.
The company is also transitioning to a subscription-based model, with subscription and over-time revenues expected to comprise approximately 90% of total revenues by 2027. This shift, combined with synergies from the Amelia acquisition, could boost margins by more than 10% over the next few years, according to Piper Sandler.
Despite these positive indicators, SoundHound faces challenges in its automotive segment, where production headwinds persist. The company's four key OEM clients are expected to see a 4% decline in sales this year, potentially impacting related revenues. Nevertheless, SoundHound has reaffirmed its full-year 2025 revenue outlook of $157-177 million, reflecting confidence in its diversified business model and growth trajectory in voice AI technology.