Serens today
As of 11:46 am ET
- 52 week range
- US$2.34
▼
US$27.50
- Target price
- $8.16
Shares of AI assistant manufacturer Cerence NASDAQ: CRNC skyrocketed by early 2025 after the company announced an expanded partnership with NVIDIA. NASDAQ: NVDA. Shares rose nearly 144% in one day after the announcement. Since that one-day surge, shares were down about 31% as of the close of trading on Jan. 15. So what should investors think about this tech company with a market capitalization of less than $600 million?
It competes notably with one of the most talked about AI voice assistance companies, SoundHound AI. NASDAQ:SOUN. SoundHound is valued at about nine times Cerence, despite generating less than half of Cerence’s revenue last quarter. This signals a potential acquisition opportunity for Cerence shares. At this point, I will talk about the latest news related to Cerence and give my opinion on the merits of investing in this company.
Brief overview of the Cerence business
Cerence creates AI-powered voice assistants for the automotive industry that enable conversational communication with the car. Cerence specializes exclusively in the automotive market. This is a clear departure from SoundHound, which targets many markets, automotive being just one of them. This difference in the size of their target markets is largely due to the difference in the valuation of these firms.
Cerence’s voice assistant technology is widespread. The company estimates that more than 500 million vehicles are equipped with its technology. Moreover, the company estimates that 52% of all new vehicles for the fiscal year ending September 30, 2024 contain its technology. The company’s clients include many of the largest automotive companies around the world. Its client base includes leading players in the US, China, Japan and Europe.
The company’s revenue and earnings have recovered significantly over the past 12 months from the lows they reached in June 2023. These numbers are now slightly below the peaks they reached at the end of 2021. The company is currently profitable over the last 12 months. adjusted basis. However, its revenue and earnings fluctuate significantly from quarter to quarter. Last quarter, earnings were negative while revenue grew 32%.
Analysis of the latest news about Serens
Getting straight to the point, it doesn’t make much sense that Cerence shares soared 144% after NVIDIA’s announcement. Don’t get me wrong, this is definitely positive for the company. Expanded collaboration with NVIDIA strengthens Cerence Automotive Large Language Model (CALLM) product. This helps the company maintain its position as one of the leaders in the industry.
Cerence stock forecast for today
$8.16
-38.30% DisadvantageHold
Based on 8 analyst ratings
| High forecast | $23.00 |
|---|---|
| Average forecast | $8.16 |
| Low forecast | $3.00 |
Cerence Stock Forecast Details
However, when it comes to collaboration, the key word is “expanding.” Partnerships are nothing new. Cerence has been working with NVIDIA since at least 2022. Specifically for the CALLM product, a partnership with NVIDIA was first announced at the end of 2023. Thus, this growth was most likely due to speculative excitement. This does not change the fundamentals of the company. At a small company like Cerence, the mere mention of NVIDIA gets people extremely excited.
Gasoline was likely added to the fire of this rally in the form of a short squeeze. On January 3, the interest rate on shares was 17%. The initial rally likely led to short covering, sending the stock higher. Notably, the short interest rate remains at 17%, indicating that the bears have not budged.
In my opinion, it would be more logical to see a significant increase in the price of Cerence based on the announcement made just a day before the NVIDIA announcement. On January 2, the company announced a deal to develop a next-generation automotive experience for Jaguar Land Rover. This means the company is effectively acquiring a new customer, representing a potentially long-term source of revenue. However, the stock barely budged that day, rising just 1%.
Final thoughts and views on Cerence
Overall, Cerence still has some things to prove. The company still needs to find a way to achieve sustainable revenue growth over a long period. Much of this will need to be done through the CALLM product, which represents a significant technological advance. The key is to continue to monitor the implementation of the CALLM product in the future. It will also be important to see if the company can charge significantly more for the product due to its advanced capabilities.
Hopefully the company will release detailed initial data on the product’s success in its February earnings report. Cerence remains a name to watch as its next-generation AI solutions are still in the early stages of adoption. The success of the CALLM product could lead to tremendous overall stock success over time.
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