What happened

Shares of Massachusetts-based Cerence (NASDAQ:CRNC) had a strong December, rising 10.8% according to data provided by S&P Global Market Intelligence. The maker of software for artificial intelligence and voice-based virtual assistants in automobiles announced some key contracts and attracted bullish commentary from a Wall Street analyst. 

So what

First, Cerence had two good wins last month. Fiat Chrysler Automobiles (NYSE:FCAU) selected it to provide a "conversational AI" for its upcoming electric Fiat 500. The 500 will be FCA's first fully electric vehicle, and sales will likely be modest -- but the deal could open the door to more significant business in the future.

A Fiat 500's dash, showing the multimedia system's touchscreen.

Cerence will provide software for the voice-based virtual assistant in Fiat Chrysler's upcoming electric Fiat 500. Image source: Fiat Chrysler Automobiles.

Cerence was also selected to provide voice technology for a new version of Mercedes-Benz's in-car multimedia system. Its software will power key functions of MBUX, a high-end system that Mercedes-Benz describes as "a concierge in the dashboard."

In addition, Cerence received funding from Germany's Federal Ministry for Economic Affairs and Energy, which is sponsoring a project to improve human-machine interaction. Cerence's role in the project will be to create "emotionally aware" in-car assistants that help increase passengers' trust in autonomous vehicles, it said. 

Finally, in a note released on Dec. 23, Wedbush analyst Daniel Ives raised his firm's share price target for Cerence from $90 to $120, while maintaining an outperform rating on the stock. Ives wrote that momentum from the company's recent wins gave him more confidence that it will be able to win business from other major automakers in 2021.

Now what

Cerence's fiscal year began on Oct. 1, and auto investors can expect the company to report earnings for the first quarter of its fiscal 2021 sometime in mid-February. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.