SoundHound AI (SOUN) investors are on edge today, as the stock sits near its 52-week low. The big question in the market is whether a “short squeeze” could suddenly send the price back up, or if the recent phase of insider selling is a warning sign that more trouble is ahead.
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Recent Insider Selling Supports Investor Caution
Lately, the top bosses at SoundHound have been selling a lot of stock. This week, several key leaders, including CEO Keyvan Mohajer, the CFO, and the COO, disclosed sales of thousands of shares. For example, on March 20, the CEO sold over 124,000 shares at an average price of about $6.79.
While seeing insiders sell can be scary, it’s important to know why they are doing it. Much of this selling was actually done to cover tax bills from their stock bonuses. However, the timing is tough. The stock has dropped nearly 19% in the last week alone, and seeing the leaders sell while the price is at a one-year low of $6.36 makes many people nervous about the company’s near-term health.
High Short Interest Supports the Squeeze Theory
Even with the selling, some traders are betting on a massive comeback. This is because SoundHound is currently one of the most shorted stocks on the market. Short interest, which is basically a bet that the stock will fall, recently hit 35.6% of all available shares.
When so many people bet against a stock, a short squeeze can happen. This occurs when a bit of good news forces those bears to buy back shares all at once to avoid losing money. This sudden influx of buying can cause the price to skyrocket in just a few hours. With the stock down 70% from its highs last fall, even a small piece of good news could act like a spark in a powder keg.
Is a Short Squeeze Likely for Soundhound AI?
A short squeeze is possible, but it is not a guarantee. For a squeeze to happen, SoundHound needs a reason for people to start buying again. Right now, the company is growing fast. Revenue jumped 59% in the last quarter, but the company is still losing money. Analysts say the bears are betting that the company will run out of cash or that bigger tech giants will steal its customers.
- The Bull Case: If SoundHound announces another big deal (like its recent partnership with Peet’s Coffee) or if a bigger company tries to buy them, the shorts will be forced to run, and the stock could explode.
- The Bear Case: If the company keeps losing money and insiders keep selling, the price might just keep drifting lower, and the shorts will simply win their bet.
Is SOUN Stock a Good Buy?
According to TipRanks, SOUN stock has received a Moderate Buy consensus rating, with four Buys and one Hold assigned in the last three months. The average SoundHound stock price target is $14.50, suggesting a potential upside of 124% from the current level.
