SoundHound AI (NASDAQ: SOUN) is trading well above its analysts' consensus, suggesting it could correct as much as 22% as of late October, but that is unlikely. Although lagging, the consensus price target and analyst revision trend provide robust support for this stock. The consensus is up more than 100% in the preceding 12 months and nearly 10% in the preceding 30 days, with the freshest targets pointing to new all-time highs.
The latest revision is from H.C. Wainwright, which maintained a Buy rating while lifting its price target to $26. The $26 is the new Wall Street high, forecasting a 30% upside from critical support targets, and would be a new all-time high when reached. The fact that a new all-time high is in the picture is significant as it reflects a shift in sentiment likely to continue providing market support.
Technically speaking, a move to new highs would be substantial, opening the door to another rally that could equal the April to October rebound in magnitude, a move worth approximately $17.50 or 70% from the critical resistance point.
Analysts at H.C. Wainwright pointed to the November Q3 earnings release as a catalyst. In their view, the company is well-positioned to “materially outperform” its consensus target, and other catalysts exist. The long-term forecasts are also too low due to recent acquisitions, including Interactions Corporation.
Interactions Corporation is an AI company focused on customer service and workflow automation, expected to drive significant revenue gains and accelerate the timeline to profitability. It is focused on agentic AI and helps cement SoundHound as the voice-to-meaning agentic AI provider of choice.
Sell-Side Activity is Leading to a Short-Squeeze in SoundHound AI
The sell-side activity is leading to a short-squeeze in SoundHound AI that could be impressive. Not only is the short-interest high and trending higher as of late September, but analysts' coverage is increasing, and institutions are buying.
Regarding the short interest, MarketBeat data reveals it was running near 32% and record highs at the end of September, and it is unlikely to have fallen much, considering the price action over the first weeks of October. The market is edging higher but shows considerable resistance with long upper shadows on the candlestick formations.
The reason to believe a squeeze is coming is the analysts and institutions. Not only are analysts lifting their price targets, but the coverage has doubled in the preceding 12 months, with sentiment firming to Moderate Buy over the past quarter, and institutions are accumulating.
The institutional interest remains low but is sufficient to provide a market tailwind at 20%, given that the balance of activity has been greater than $2 bought for every $1 sold each quarter this year. This trend is likely to continue and may gain momentum in the upcoming quarters, keeping the share prices elevated and the short sellers under pressure.
The Catalyst for Short-Squeeze is at Hand for SoundHound Investors
The analysts are expecting a solid quarter for SoundHound with 60% revenue growth in the forecast. However, the trends include 80% of analysts reducing their estimates during the quarter and a forecast for sequential contraction, which is unlikely. The likely outcome is that SoundHound will outperform its consensus; the question is by how much, and it could be substantial.
Merely matching the previous quarter’s revenue would be sufficient to add another 1000 basis points to the growth outlook, and sequential growth is likely. The company has announced several new clients and deepened penetration during the quarter, suggesting revenue could have grown substantially. At the very least, guidance will be hot and provide incentive for analysts, institutions, retail investors, and short covering.
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The article "The Melt-Up in SoundHound AI Isn’t Over By a Long Shot" first appeared on MarketBeat.
