2024-07-26 07:19:15 ET
Summary
- Shares are down nearly 70% since its latest earnings release, where management reduced guidance and withdrew its mid-term targets.
- Management aims to improve profitability by rightsizing the business to align closer with the latest outlook for growth.
- Despite the valuation appearing cheap for this market leader, I see several risks that keep me on the sidelines for now.
Investment thesis
Cerence ( CRNC ) is a leading provider of conversational AI solutions for the automotive segment. The company works with nearly all major OEMs globally and has a market penetration of 54%. Its products span from Voice Assistant solutions to driver monitoring systems and its revenue comes from three segments namely Licenses, Connected Services and Professional Services. Its latest product offerings have seen a significant boost in performance due to the introduction of Gen AI and the adoption of Large Language models. The company's value proposition versus its competitors is its ability to offer a white label solution where it can plan and build customized solutions together with the respective OEM....
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Cerence: Near-Term Uncertainties Have Dimmed Its Promising Growth Outlook