Cantor Fitzgerald upgraded SoundHound ai from Neutral to Overweight as its acquisition of Amelia, an enterprise ai software company, is expected to nearly double its revenue by 2025.
SoundHound, which specializes in conversational artificial intelligence solutions for businesses, announced the acquisition on Thursday, along with its second quarter of 2024 financial resultswhich exceeded estimates.
2024 revenue is expected to reach at least $80 million, and SoundHound now projects 2025 revenue to exceed $150 million due to the acquisition. Amelia is projected to add $45 million through recurring ai software revenue along with professional services and agent-related fees.
SoundHound shares increased by 21% By the close of markets on Thursday, they had already dipped slightly during pre-market trading on Friday.
Cantor Fitzgerald raised its price target to $7 from $5.
“We believe this could be a transformative acquisition for SOUN,” Cantor Fitzgerald analyst Brett Knoblauch said in a note.
“Amelia will add exposure to SOUN's financial services and healthcare clients, and while they would have entered these markets, it would likely have taken them several years to do so,” he added.
SoundHound acquired Amelia for $10 million in cash, $70 million in stock and agreed to repay $70 million of Amelia's $100 million debt.
“In other words, a ~4.5x buyout multiple for a company that has significant recurring revenue and operates in highly synergistic end markets,” Knoblauch said.
This follows the acquisition announcement in June of Allset, a food ordering platform with nearly 7,000 restaurant partners in the US.
SoundHound revealed that it has closed several new deals with major clients. Its ai-powered voice ordering system will be rolled out to Beef ‘O’ Bradys’ in over 20 states across the US. It also signed deals with a major pizza chain to manage phone ordering services. Additionally, Employee Assist, SoundHound’s voice-based ai offering for back-of-house staff, will be used by two coffee chains.
SoundHound has expanded its partnership with Stellantis (STLA) to six brands.
SoundHound has a Hold rating from Seeking Alpha analysts, but a Buy rating from Wall Street analysts. It has a Hold rating from Seeking Alpha's Quant system, which routinely beats the market.
