Expensive stocks typically earn their valuations through superior growth rates that other companies simply can’t match.
The flip side though is that these lofty expectations make them particularly susceptible to drawdowns when market sentiment shifts.
From commerce to culture, software is digitizing every aspect of our lives. In the past, the undeniable tailwinds fueling SaaS companies led to lofty valuation multiples that made it easier to raise capital.
But this was a double-edged sword as the high prices exposed them to big drawdowns, and unfortunately, the industry has tumbled by 4.7% over the last six months. This performance was worse than the S&P 500’s 2.4% loss.
Voice AI recognition company SoundHound (NASDAQ:SOUN) missed Wall Street’s revenue expectations in Q1 CY2025, but sales rose 151% year on year to $29.13 million. Its GAAP profit of $0.31 per share was significantly above analysts’ consensus estimates.
