Goldman Sachs analyst Mark Delaney has maintained their neutral stance on CRNC stock, giving a Hold rating today.
Mark Delaney’s rating is based on a mix of challenges and transitional dynamics that Cerence Inc. is currently facing. The company has recently reduced its financial projections for FY2024, bringing down its revenue, adjusted EBITDA, and EPS estimates significantly. This revision followed a detailed review after initial royalty reports indicated a negative trend. Moreover, the withdrawal of the multi-year outlook signals uncertainty about the company’s future performance. Delaney suggests that these downward adjustments, combined with a decrease in the five-year backlog and an overhang of excess license inventory expected to persist until FY26, point to sustained pressure on the company’s financials in the short to medium term.
In Delaney’s view, while Cerence’s strategic pivot towards AI-driven voice products has potential, evidenced by six OEM design wins, the benefits to the profit and loss statement are not immediate. The analyst anticipates that it will take time for these new products to materially contribute to the company’s financial outcomes. Despite these headwinds, Delaney believes that the current market valuation of Cerence’s stock already reflects these issues, which justifies maintaining a Hold rating. He underscores the importance of considering these factors in the context of the company’s enterprise value and multiples, which align with the market’s adjusted expectations.
In another report released today, Wells Fargo also assigned a Hold rating to the stock with a $6.50 price target.
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Cerence (CRNC) Company Description:
Cerence, Inc. builds automotive cognitive assistance solutions to power natural and intuitive interactions between automobiles, drivers and passengers, and the broader digital world. It also engages in the sale of software licenses and cloud-connected services. The company was founded on February 14, 2019 and is headquartered in Burlington, MA.
