MY STOCK IS FAILING :(

ZipTrader
24 Mar 202413:31

TLDRThe video discusses SoundTown AI, a voice AI and speech recognition company, whose stock has recently dropped significantly. The host analyzes a short seller report alleging the company's misleading claims about its AI capabilities and compares its performance with competitors like Amazon, Google, and Microsoft. Despite the negative report, the company shows growth in sales and has a strong patent portfolio. The host suggests SoundTown AI could be a buyout candidate and advises viewers to do their own due diligence.

Takeaways

  • 📉 SoundHound AI (SON) stock is experiencing a significant drop in value, down nearly a third from its recent highs.
  • 🚀 The company is a voice AI and speech recognition firm, known for its natural language understanding and search technologies.
  • 🤖 SoundHound's business model includes a voice AI developer platform, Houndify, and AI for voice-enabled digital assistance, among other products and partnerships.
  • 💭 A short seller report alleges that SoundHound is misleading investors about its AI capabilities and that its technology is basic and overhyped.
  • 💡 Despite the negative report, SoundHound has shown year-over-year growth in sales and net income, indicating potential value in its software offerings.
  • 📈 SoundHound's sales have increased by 80% year-over-year, with net profit margin improving by 67%, suggesting a positive trajectory for the company.
  • 💰 The company has a robust patent portfolio with over 260 patents, which could be a compelling factor for its value and competitive edge.
  • 🔄 Insider sales have occurred, with key personnel selling small portions of their holdings, which might indicate a lack of confidence in the stock's sustained value.
  • 💸 SoundHound has undergone dilution, increasing its share count, which could impact the stock price and investor sentiment.
  • 📊 The video creator suggests that SoundHound could be a buyout candidate due to its technology and potential, despite the current challenges.
  • 📉 The video creator advises that while the stock has potential, investors should use tight stop-loss strategies due to the volatile nature of the market and the stock.

Q & A

  • What is SoundTown AI and what does it specialize in?

    -SoundTown AI is a voice AI and speech recognition company founded in 2005. It specializes in natural language understanding, sound recognition, and search technologies. Its business model includes a voice AI developer platform called Houndify, SoundHound chat AI for voice-enabled digital assistance, a music recognition app, automotive integrations with major manufacturers, and strategic partnerships for technology licensing.

  • Why has SoundTown AI's stock price dropped significantly?

    -The stock price of SoundTown AI has dropped significantly due to a combination of factors. These include a short seller report warning investors to stay away, the aftermath of Nvidia's GTC event, and a general market trend of buying the rumor and selling the news. The aggressive downtrend suggests there is more going on, such as allegations in the short seller report that question the company's AI capabilities and business model.

  • What are the core allegations made by the short seller report against SoundTown AI?

    -The short seller report alleges that SoundTown AI is misleading investors about its AI capabilities, its AI product searches Wikipedia and returns scraped content, the company pitches their product as world-class AI but it is not on par with competitors like Chat GPT, its products often return incorrect information, its speech recognition technology is a commodity service competing with big tech companies, and its largest competitor in the automotive space spends more on R&D and has been taking their customers.

  • How has SoundTown AI's business performance been in recent years?

    -Despite some customer churn, SoundTown AI's business performance has been improving year-over-year. Revenue is up 80%, net income is up 41%, diluted EPS is up 53%, net profit margin has improved by 67%, operating income is up nearly 60%, and the net change in cash is up nearly 93%. These figures indicate that the company is seeing more sales and improving margins, although it is still not yet profitable.

  • What is the significance of SoundTown AI's patent portfolio?

    -SoundTown AI's strong patent portfolio is significant as it provides a competitive edge. The company has around 260 patents, with more than 120 granted and 140 pending. This robust intellectual property protection is a compelling aspect of SoundTown AI's software, distinguishing it from its big tech competitors.

  • What is the speaker's stance on insider sales from SoundTown AI?

    -The speaker acknowledges that insider sales are a common pattern with momentum stocks and while they do not like such occurrences, they recognize it as part of the business. The speaker notes that insiders have a huge incentive to sell after their stock has significantly increased in value and that the shares sold represent a relatively small percentage of the total shares held by each insider.

  • How does the speaker view the dilution of SoundTown AI's shares?

    -The speaker is not a fan of dilution and is critical of it, even in their favorite companies. They note that SoundTown AI started the year with around 255 million shares and has now increased to 309 million shares, which has likely kept the stock price lower. However, they also recognize that companies often raise capital at higher prices to increase shareholder value in the long run.

  • What is the speaker's overall assessment of SoundTown AI's value and potential?

    -The speaker believes that SoundTown AI has built an excellent software apparatus and that's where the real value lies. Despite the company being at an early stage and losing money, the speaker sees SoundTown AI as a potential buyout candidate with a lot of potential. They expect another round of buying up once the stock price drops to lower levels and maintain that it is worth $4 or $5 a share in the long run.

  • What advice does the speaker give to those interested in investing in SoundTown AI?

    -The speaker advises investors to have a tight stop loss when trading SoundTown AI, especially if they are trading it with the momentum. They also emphasize the importance of recognizing the company's value in its software and understanding that the company is still developing products and investing in R&D, which takes time to become profitable.

  • How does the speaker view the future of SoundTown AI in relation to the AI sector?

    -The speaker views SoundTown AI as being in a good position in the AI sector, especially considering the current bull market highlighting AI stocks. They suggest that the company could either be bought up by a bigger player or continue to grow once the overall AI sector is further recognized and integrated into businesses.

  • What is the speaker's final verdict on SoundTown AI as a buy or sell?

    -The speaker does not explicitly state a buy or sell verdict but implies that SoundTown AI has potential and value in its software. They suggest that investors should be prepared for market shifts and have a strategy in place, including a tight stop loss, to manage their investment in SoundTown AI effectively.

Outlines

00:00

📉 SoundTown AI's Stock Performance and Short Seller Report

The paragraph discusses the significant drop in SoundTown AI's stock price, which has fallen nearly a third from its recent highs. The video aims to analyze a short seller report that warns investors to stay away from the stock. The report alleges that SoundTown AI is a failing company, misleading investors about its AI capabilities, and compares it to a 'cheeseburger AI', suggesting it's a basic service used for simple tasks like food ordering. The paragraph also touches on the company's business model, its focus on voice AI and speech recognition technologies, and its strategic partnerships. It highlights the company's growth in attention due to its position in the voice AI segment and backing from Nvidia.

05:01

💡 Evaluating SoundTown AI's Software Value and Business Performance

This paragraph delves into whether SoundTown AI's software has real value by examining if the company has retained clients and if these clients are increasing their spending on the software. It presents a positive picture of the company's year-over-year growth in sales, net income, and other key financial metrics. The paragraph also discusses the company's strong patent protection, with over 260 patents, and its competitive platform in the AI space. It refutes the short seller's claim that SoundTown AI's software is worthless, arguing that the increasing sales indicate its value. The paragraph also addresses the company's path to profitability, comparing it to the biotech industry where profitability takes time after significant investment in R&D.

10:02

🤔 Insider Sales and Dilution Concerns for SoundTown AI

The final paragraph addresses concerns about insider sales and dilution related to SoundTown AI. It notes that some key insiders have been selling small portions of their holdings, which might indicate a belief that the company's enterprise value will not remain above current levels. However, the paragraph suggests that this is a common pattern for momentum stocks and does not necessarily reflect negatively on the company. It also discusses the company's capital raising through share offerings, which has increased the total number of shares and potentially kept the stock price lower. The paragraph concludes by reiterating the potential of SoundTown AI's software and its recognition in the AI sector, while acknowledging the early stage of the business and the challenges in prioritizing shareholder value.

Mindmap

Keywords

💡SoundTown AI

SoundTown AI is a voice AI and speech recognition company founded in 2005, known for its natural language understanding, sound recognition, and search technologies. The company has gained attention due to its position in the voice AI segment and backing from Nvidia. In the video, the discussion revolves around the company's stock performance, business model, and the allegations made against it by short sellers.

💡Stock Performance

Stock performance refers to the changes in the market price of a company's stock over a period of time, reflecting investor sentiment and the company's financial health. In the context of the video, SoundTown AI's stock ticker symbol is SON, and the stock has experienced a significant drop from its recent highs, nearly a third down, which is a central point of discussion.

💡Short Seller Report

A short seller report is a document or analysis produced by short sellers that critiques a company's financial health, business model, or stock value, often with the intention of encouraging investors to sell the stock. In the video, a short seller report on SoundTown AI is mentioned, which warns investors to stay away and alleges that the company is misleading about its AI capabilities and overall value.

💡Momentum Play

A momentum play in stock trading refers to a strategy where an investor buys stocks that are increasing in price rapidly, expecting the trend to continue for a short period, and then sells them for a quick profit. The video discusses SoundTown AI as a momentum play, particularly after Nvidia's coverage started to spread, with the expectation that the stock price would push over $10.

💡Due Diligence

Due diligence is the process of thoroughly researching and analyzing a company or investment to make an informed decision. In the video, the speaker emphasizes the importance of doing one's own due diligence before buying or selling any stock, as it is the investor who takes on the risk and must be the one to conduct the ultimate analysis.

💡AI Capabilities

AI capabilities refer to the functionalities and abilities of artificial intelligence systems to perform tasks, such as voice recognition, natural language understanding, and data analysis. The video script discusses allegations that SoundTown AI is misleading investors about the true extent and sophistication of its AI capabilities, with claims that it is not on par with other leading AI technologies like Chat GPT.

💡Patent Protection

Patent protection is a legal mechanism that grants inventors exclusive rights to their inventions for a certain period, preventing others from making, using, or selling the invention without permission. In the context of the video, SoundTown AI's strong patent protection, with over 260 patents, is highlighted as a compelling aspect of the company's value, protecting its unique technologies from competitors.

💡Insider Sales

Insider sales refer to the practice where company insiders, such as executives or major shareholders, sell their shares in the company. This can sometimes be seen as a bearish signal, as it might indicate that insiders believe the stock is overvalued or that they have concerns about the company's future prospects. The video mentions insider sales at SoundTown AI as a factor contributing to the selloff and discusses the mixed implications of such sales.

💡Dilution

Dilution in the context of stocks occurs when a company issues more shares, reducing the percentage ownership of existing shareholders and potentially lowering the value of each share. The video discusses dilution as a concern for SoundTown AI investors, as the company has increased its number of shares, which could impact the stock price and shareholder value.

💡Buyout Candidate

A buyout candidate is a company that is considered a potential target for acquisition by another company, usually because of its strategic value, technology, or market position. In the video, SoundTown AI is described as a potential buyout candidate due to its strong software apparatus and the growing interest in AI technologies, suggesting that larger companies might be interested in acquiring it to leverage its AI capabilities.

💡Chart Analysis

Chart analysis is a method used in technical analysis to predict future price movements of stocks based on historical price patterns and trends. The video discusses SoundTown AI's stock performance in terms of chart analysis, suggesting that the stock is a momentum stock experiencing a bearish test and that there may be opportunities for buying at lower levels based on the stock's historical performance and market trends.

Highlights

SoundTown AI's stock ticker symbol SON has dropped nearly a third from its recent highs.

The company is a voice AI and speech recognition firm founded in 2005.

SoundTown AI's business model includes a voice AI developer platform, Houndify, and a music recognition app.

Nvidia's stake in SoundTown AI and its coverage starting to spread has been a key factor.

A short seller report warns investors to stay away, claiming SoundTown AI is a failing company.

The report alleges SoundTown AI is misleading investors about its AI capabilities.

SoundTown's AI product is accused of scraping content from Wikipedia.

The company's products often return incorrect information due to manual programming.

SoundTown's speech recognition technology is described as a commodity service.

SoundTown AI's largest competitor in automotive space spends more on R&D and has been taking their customers.

Despite the negative report, SoundTown AI has shown significant year-over-year growth in sales and net income.

SoundTown AI has a robust patent portfolio with over 260 patents.

The company's software sales are increasing, indicating its value despite profitability concerns.

SoundTown AI has been suggested as a potential buyout candidate by larger companies.

Insider sales have been occurring, which might indicate a belief that the stock's value won't retain above current levels.

Dilution has occurred with an increase in the number of shares, which could impact the stock price.

The company has been around since 2005, and it's now seeing increased recognition in the AI sector.

The video creator believes SoundTown AI's stock is worth $4 or $5 in the long run, despite current challenges.

The overall AI sector is currently in the spotlight, which is helping to highlight SoundTown AI's value.

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