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Microsoft Deal Lifts Nuance Stock; Tesla Gets an Upgrade

By Dan Caplinger - Updated Apr 13, 2021 at 4:42PM

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The Nasdaq gave up a bit of ground despite some gains in key stocks.

The Nasdaq Composite (^IXIC 0.00%) got off to a quiet start on Monday, easing lower by about a third of a percent by 1:30 p.m. EDT. Unlike some other major market benchmarks, the Nasdaq has remained below its record highs from February, but it wouldn't take much of a gain to send the index into uncharted territory as well.

Strategic moves among major companies listed on the Nasdaq might prove to be the catalyst for a record run, and Microsoft (MSFT 1.26%) added some fuel to the mergers and acquisitions (M&A) fire with a sizable deal. Meanwhile, Tesla (TSLA 2.55%) rebounded from recent declines as the electric-car stock got a vote of approval on Wall Street.

A Nuanced M&A approach

Shares of Nuance Communications (NUAN) climbed 16% on Monday afternoon after Microsoft announced it would purchase the speech-recognition company. Microsoft shares were up a fraction of a percent.

Microsoft and Nuance announced their agreement Monday morning, with the acquisition valuing Nuance at $19.7 billion including debt assumption. Nuance shareholders will receive $56 per share for their stock as part of the all-cash deal.

Nuance has been at the forefront of speech recognition for years, and gradual advances in artificial intelligence have made it more valuable than ever to have software capabilities that can interact with users. Microsoft does a considerable amount of business in the healthcare industry, where medical transcription services will be a vital part of any cloud computing platform.

Microsoft has made a number of acquisitions over the years, and although not all have reached their full potential, the tech giant has nevertheless had its share of successes. Investors are hopeful that integrating Nuance's technology into Microsoft's huge addressable market could pay dividends down the road.

Tesla gets a new charge

Shares of Tesla were up today more than 3%, briefly moving above the $700 mark at times during the trading day. The electric vehicle (EV) pioneer got favorable comments from a Wall Street analyst company and potentially stands to benefit from friendly legislation in Washington.

Tesla Semi tractor trailer EV.

Tesla's Semi electric truck. Image source: Tesla.

The upgrade came from Canaccord Genuity, which boosted its view on Tesla from hold to buy. It also more than doubled its price target to $1,071 per share, a huge rise compared to its previous $419 target. Analysts pointed to the potential for ancillary business segments in power generation and energy storage to create a valuable ecosystem of Tesla products that could benefit from cross-selling and enhance the company's overall reputation.

Meanwhile, many are looking closely at proposed federal legislation that could renew depleted reserves of EV rebates. Tesla buyers no longer qualify for credits, but it's possible that changes in the law could allow additional credits for future buyers.

Tesla has seen a considerable pullback from its all-time highs around $900, and Canaccord seems optimistic about its prospects for getting back to its past levels. What lawmakers in Congress do with proposed changes to EV tax credits could play a big role in determining the course of Tesla stock in the next several months.

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Stocks Mentioned

Nuance Communications, Inc. Stock Quote
Nuance Communications, Inc.
Microsoft Corporation Stock Quote
Microsoft Corporation
$262.85 (1.26%) $3.27
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
$11,127.85 (0.00%) $0.00
Tesla, Inc. Stock Quote
Tesla, Inc.
$699.20 (2.55%) $17.41

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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