Shares of an AI security solutions developer plummeted 25% after the company lowered its forecast

Shares of SoundThinking, a micro-cap developer of AI-powered security solutions, plummeted 25% on Friday, August 14. The company’s second-quarter results fell short of its own expectations, leading to a downward revision of its full-year forecast. Following this, at least two Wall Street analysts downgraded their recommendations on SoundThinking stock.

Shares of SoundThinking, whose solutions include gunshot and weapon detection systems as well as an investigation management system, fell 25% on August 14 to $6.20, their lowest level since mid-May.

The day before, the company reported that its revenue for the second quarter had fallen 8% year-over-year to $23.9 million. It explained that this was primarily due to the non-renewal or delays in renewing contracts with several clients. The net loss for the same period soared by nearly 55% to $4.8 million, or $0.37 per share.

Both figures fell short of Wall Street's consensus forecast, according to MarketBeat.

This trend has forced the company to lower its revenue forecast for the full year 2026. Previously, it had projected revenue in the range of $109 million to $111 million; now, it expects revenue to be between $99 million and $100 million. SoundThinking has also halved its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) margin forecast—from 16–18% to 8–9%.

CEO Ralph Clark acknowledged that the quarterly results fell short of SoundThinking’s expectations (his comments are quoted in the company’s press release). At the same time, SoundThinking “remains enthusiastic about the prospects for long-term growth in the <...> security sector,” the top executive noted.

On August 14, the day after the quarterly earnings report was released, at least two Wall Street analysts— Lake Street Capital and Citizens —downgraded their recommendation on SoundThinking shares from “buy” to “hold.”

Investment bank Cantor Fitzgerald maintained its “hold” rating on the company’s stock but lowered its price target by 20% to $8 (representing 29% upside potential relative to Friday’s closing price). Its analysts also point out the extent of the company’s downward revisions to its forecasts, which raises the bar for SoundThinking’s growth needed to warrant a re-rating.

In total, the company's stock has four "hold" recommendations from Wall Street analysts and two "buy" recommendations. The average price target is $9, which is 45% higher than the most recent closing price.