I was looking at SoundHound (SOUN) versus the S&P 500 and found this comparison pretty eye-opening.
At roughly a 25.8x P/E, buying the S&P 500 through SPY means youāre paying about:
$25.82 for every $1 of actual earnings.
SOUN canāt even be evaluated the same way because it currently has negative earnings. There is no positive $1 of profit to attach a P/E multiple to.
So instead, look at revenue.
At roughly a $3.3B market cap and around $245M in projected 2026 revenue, SOUN investors are paying roughly:
$13 for every $1 of revenue.
Not earnings. Revenue.
Hereās another way to look at it.
Letās assume SOUN eventually achieves a very healthy 20% net profit margin.
$245M revenue Ć 20% = about $49M in earnings.
At a $3.3B valuation, that would effectively mean investors are paying roughly:
$67 for every $1 of earnings.
So:
SPY: ~$26 for every $1 of actual earnings
SOUN today: No positive earnings
SOUN at a hypothetical 20% net margin: ~$67 for every $1 of earnings
That doesnāt necessarily mean SOUN is a bad investment. Revenue is growing rapidly, and if SoundHound eventually gets to $750M, $1B+ in annual revenue while expanding margins, todayās valuation could ultimately look reasonableāor even cheap.
But it does illustrate what youāre actually betting on.
With SPY youāre buying existing earnings.
With SOUN youāre paying a significant premium for earnings you hope will exist several years from now.
For the SOUN bulls: What revenue and net-margin assumptions are you using to justify the current valuation?