Sirince today
As of 12:21 PM ET
- 52 week range
- $2.34
▼
$27.50
- Price target
- $8.16
Shares of Cerence, an artificial intelligence assistant maker Nasdaq:CRNC It exploded upwards to start 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 increase, stock trading is down roughly 31% as of the January 15 close. So, what should investors make of this tech company with a market cap of less than $600 million?
It’s particularly competing with one of the most talked-about companies in the AI voice assistant space, SoundHound AI NASDAQ:SOUN. SoundHound is worth about nine times more than Cerence, even though it generated less than half of Cerence’s revenue last quarter. This indicates a potential opportunity in Cerence stock. I will detail the recent news surrounding Cerence and offer my opinion on the merits of investing in this company at this point.
A brief overview of Cerence’s work
Cerence is building AI-powered voice assistants for the automotive industry, allowing for conversational communication with the car. Cerence focuses solely on the vehicle market. This is a clear difference from SoundHound, which targets a large number of markets, of which cars are just one. This difference in the size of target markets has a lot to do with the difference in valuation between these companies.
Cerence’s voice assistant technology has strong penetration. The company estimates that more than 500 million cars contain its technology. What’s more, it estimates that 52% of all new cars in the fiscal year ending September 30, 2024, contain its technology. The company’s clients include many of the largest automobile companies around the world. Major players in the United States, China, Japan and Europe make up its customer base.
Over the past 12 months, the company’s revenue and margins have recovered significantly from their lows in June 2023. These numbers are now just below the peak they reached at the end of 2021. The company is currently profitable over the past 12 months. Modified basis. However, its revenues and profits fluctuate wildly on a quarterly basis. The most recent quarter saw negative earnings and revenue growth of 32%.
Analysis of recent news surrounding Sirens
To get straight to the point, it doesn’t make sense that Cerence shares rose 144% after NVIDIA’s announcement. Don’t get me wrong, this is definitely a positive for the company. Expanded collaboration with NVIDIA enhances the company’s Cerence Automotive Large Language Model (CALLM) product. It helps the company maintain its position as one of the leading companies in this field.
Cerence stock forecast today
$8.16
-38.30% negativeHe catches
Based on 8 analyst ratings
| High expectations | $23.00 |
|---|---|
| Average expectations | $8.16 |
| Low expectations | $3.00 |
Cerence stock forecast details
However, when referring to collaboration, the operative word is “expanded.” The partnership is not new. Cerence has been working with NVIDIA ever since At least 2022. Specifically, regarding the CALLM product, the partnership with NVIDIA was first announced At the end of 2023. Therefore, this rise was most likely due to speculative enthusiasm. It does not significantly change the fundamentals of the company. For a small company like Cerence, the mere mention of NVIDIA gets people very excited.
It is likely that gasoline was poured on the fire of this gathering in the form of a short squeeze as well. The stock had a high short interest on January 3 at 17%. The initial rally likely caused short covering positions, sending the stock higher. Notably, short interest remains at 17%, indicating that bears are not budging from their positions.
To me, it would have made more sense to see Cerence rise significantly following the announcement it made just a day before NVIDIA’s. On January 2, the company announced a deal for Developing next-generation in-car experiences For Jaguar Land Rover. This means that the company is actually acquiring a new customer, which represents a potential source of revenue in the long term. However, shares barely rose that day, rising just 1%.
Final thoughts and outlook on Cerence
Overall, Sirens still has some important accomplishments to accomplish. The company still needs to find a way to achieve consistent revenue growth over a long period. It will need to do this largely through its CALLM product, which represents a major technological advance. Continuing to monitor CALLM product adoption in the future is key. It will also be important to know if the company can charge significantly more for the product due to its enhanced capabilities.
Hopefully, the company will release detailed preliminary data on the product’s success in its February earnings report. Cerence remains a name to watch as next-generation AI assistant solutions are still in the early stages of adoption. The success of the CALLM product can lead to tremendous overall success for the stock over time.
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