There is one very simple reason I expect SoundHound AI(NASDAQ: SOUN) stock to beat the market over the next seven years. The company has a huge backlog of long-term contracts and other unfilled orders, just waiting to convert into cash-based revenues. Market makers seem to have missed this as-yet untapped source of future sales -- and the average contract in SoundHound AI's backlog pool is a seven-year deal.
The backlog was worth $723 million in the second quarter. That's up from $682 million in the previous quarter and $339 million in the year-ago period. In the summer of 2023, the backlog was growing at a 20% annual rate. Now, the rate of year-over-year growth has accelerated to 113%. The company is busy securing new contracts.
Meanwhile, SoundHound AI has started to collect subscription fees and other revenues from previously dormant contracts. As a result, its revenues are skyrocketing right now:
SOUN Revenue (TTM) data by YCharts. TTM = trailing 12 months.
Where SoundHound AI's customers are coming from
So far, most of SoundHound AI's voice control sales rest on the twin pillars of automotive and restaurant customers.
- Fiat, Chrysler, and Maserati parent Stellantis(NYSE: STLA) is rolling out SoundHound AI voice controls with ChatGPT integration across its brands in Europe and Japan these days. American installations shouldn't be far behind.
- Recent restaurant deals include popular fast-food chain White Castle, sandwich-slinger Jersey Mike's, and sports bar chain Beef 'O' Brady's. The names are getting familiar, and you might have already interacted with SoundHound AI's computer-controlled voice ordering systems.
- The company is making strategic buyouts in the artificial intelligence (AI) space for voice controls and e-commerce integration. These deals should firm up SoundHound AI's grip on its core target industries while expanding its reach into new sectors.
This little AI expert is going places, and the revenue collection is just getting started. Keep an eye on SoundHound AI's order backlog as it converts into a proper revenue stream over the next few years. As the company's sales soar, the stock price should follow suit.
Should you invest $1,000 in SoundHound AI right now?
Before you buy stock in SoundHound AI, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $792,725!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of August 22, 2024
Anders Bylund has positions in SoundHound AI. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.
