SoundHound's Artificial Intelligence Venture Experiences a Dip Today – Should Investors Consider Purchasing the Shares?
SoundHound's Artificial Intelligence Venture Experiences a Dip Today – Should Investors Consider Purchasing the Shares?
Houndify Tech (HOUN -9.55%) shares are taking a hit today after the company's third-quarter financials were released yesterday evening. As of 12:15 p.m. ET, the share price has dropped by 18.7%.
Houndify Tech revealed its third-quarter figures after market close yesterday, reporting revenue and earnings that surpassed expectations. The company reported a non-GAAP loss of $0.04 per share on sales of $25.09 million for the quarter, surpassing analyst estimates of a $0.07 per-share loss on revenue of $23.03 million.
Sales increased by around 89% compared to the same quarter last year, and margins improved in several areas. Despite these positive results, the stock is witnessing substantial sell-offs today.
Should you consider buying Houndify Tech shares?
Besides the impressive sales and earnings beats in Q3, Houndify also revised its revenue targets for both this year and next. The company now expects to achieve sales between $82 million and $85 million, an improvement from its previous projection of revenue surpassing $80 million. For 2025, it's targeting sales between $155 million and $175 million, an upgrade from its previous forecast of over $150 million in sales.
Despite today's significant drop, the stock has seen a rise of around 26% over the past month. The Q3 report did not contain any unwelcome surprises or disappointments. The performance in the quarter and future projections surpassed most analyst expectations, with today's sell-off seeming to be a result of the "buy the rumor, sell the news" phenomenon. The stock has already increased by 191% since the start of the year, and some investors might have been hoping for even more remarkable performance beats to strengthen their bullish positions.
A key concern surrounding Houndify is whether it can deliver on its ambitious growth-driven valuation. Although the business is showing strong sales growth, Houndify Tech currently has a valuation of approximately 26.7 times this year's projected revenue. As a result, investors with a lower risk tolerance may still find the stock's valuation too speculative to justify purchasing it at its current price.
On the contrary, Houndify's short-term financial outlook has improved significantly compared to prior estimates. Investors who were bullish on the stock before yesterday's report found little reason within the Q3 data to change their views, and today's sell-off could present an opportunity for those to buy in at a lower price. To minimize risk, it would be wise to consider implementing a dollar-cost-averaging strategy instead of purchasing a large number of shares at once.
Investors looking to capitalize on Houndify Tech's strong performance might consider dollar-cost-averaging, as the current sell-off could present an opportunity to buy shares at a lower price. Despite today's decline, the stock has still seen a significant increase of 26% over the past month, indicating the potential for future growth.
In the realm of finance, Houndify Tech's stock price has been impacted by investors' reactions to its third-quarter financials and revenue projections for both this year and next. The company's ambitious growth-driven valuation has raised concerns for some investors with a lower risk tolerance, but its strong sales growth has left little reason for the bullish investors to change their views.