SoundHound AI (NASDAQ:SOUN) saw its stock climb 5% in premarket trading Tuesday after Piper Sandler initiated coverage with an Overweight rating and a price target of $12. The investment firm described the voice-AI company as a “direct play on the A.I revolution,” thanks to its robust conversational technology.
Piper Sandler’s analysts highlighted SoundHound’s architecture—which combines automatic speech recognition (ASR) and natural language processing (NLP)—as a technological edge enabling fluid and responsive AI-powered conversations.
The company’s voice-AI solutions serve a wide range of industries, including automotive, IoT, restaurants, and customer service. Among these, Piper Sandler sees the most potential in the quick-service restaurant (QSR) and customer experience (CX) markets.
A key catalyst for growth, according to the report, is SoundHound’s recent acquisition of Amelia. This move has allowed the company to expand into contact center AI—a space that Piper Sandler estimates will grow into a $30 billion opportunity by 2027.
“Combined, we see a $30B serviceable addressable market by 2027, with SoundHound an early leader in each market,” analysts James E. Fish and Caden Dahl wrote in their Monday note.
The analysts also pointed to SoundHound’s shift toward a recurring revenue model as a driver of improved financial performance. Subscription-based and “Over-Time” revenue streams are projected to account for 90% of total revenue by 2027, a significant jump from just 4% two years ago.
Piper Sandler believes this transition, along with operational synergies from the Amelia acquisition, could meaningfully enhance profitability. “At a minimum, we think synergies could boost margins by >10% over the next few years,” the analysts noted.
However, the report wasn’t without caution. The firm flagged the auto sector as a potential weak spot, given lingering production challenges. Currently, automotive represents roughly 25% of SoundHound’s total business exposure, and its top four OEM partners are expected to face a 4% drop in vehicle sales this year.
“We are wary of other items such as auto production, low profitability but need for more awareness, and debate around organic growth, but see the opportunities and setup as more compelling at these levels,” the analysts concluded.