DCF model suggests SoundHound stock is egregiously overvalued

SoundHound AI Inc (NASDAQ: SOUN) has become a poster child for speculative enthusiasm in the generative artificial intelligence space.

With its voice-enabled platform gaining traction across automotive, restaurants, and enterprise verticals, the California based company recently guided for $157 million to $177 million revenue for the current year – roughly double its revenue in 2024.

Still, even under an aggressive 75% compound annualised growth rate (CAGR) through 2029 and a rather generous 25% EBITDA margin – a discounted cash flow (DCF) model reveals that SOUN shares are trading at more than four times their intrinsic value.  

Currently priced at $13 per share, SoundHound commands a market capitalization of over $5.3 billion.

That valuation implies near-flawless execution and sustained hypergrowth – expectations that even the most bullish financial models struggle to justify.

SoundHound stock: DCF model highlights valuation gap

Using 2025 revenue of $167 million as a starting point and applying a 75% CAGR, SoundHound’s revenue would reach $1.29 billion by 2029.

Assuming EBITDA margins ramp to 25%, the projected free cash flows (after tax) look like this:

Discounting these cash flows at only 11%, the present value of the 5-year stream is approximately $255 million.

The terminal value, based on a 3% perpetual growth rate, comes to $2.26 billion, which discounts back to $1.27 billion. Combined, the enterprise value is $1.52 billion.

With ~409 million shares outstanding, the intrinsic value per share is just $3.72 – a far cry from the current $13 price tag.

SOUN share price reflects speculative premium

Even under these hyper-growth assumptions, SOUN shares appear egregiously overvalued. The model assumes:

1. Revenue growing nearly 15x in five years
2. EBITDA margins expanding from negative to 25%
3. Minimal capital expenditures and working capital drag

Yet the valuation still falls short of market expectations.

This suggests investors are pricing in not just execution, but breakthrough monetization, dominant market share, and perhaps acquisition upside.

While SoundHound’s partnerships with automakers like Stellantis and Lucid Motors, and restaurant chains like White Castle, offer real traction, the company remains unprofitable and faces margin pressure from recent acquisitions.

Is it worth buying SoundHound today?

The disconnect between modeled fundamentals and market price implies that SoundHound’s valuation is driven more by narrative momentum than discounted cash flows.

Investors may be betting on a future where voice AI becomes ubiquitous—but the financial path to that future remains uncertain.

Unless SoundHound delivers sustained revenue growth, margin expansion and monetization at scale, SOUN shares could face a painful repricing once the market refocuses on fundamentals. For now, the DCF math suggests caution.

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