Please ensure Javascript is enabled for purposes of website accessibility

Is This an Overreaction to Cerence's Earnings?

By Jose Najarro – Nov 24, 2021 at 6:00AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The semiconductor shortage is impacting Cerence's future outlook.

Today's video focuses on Cerence (CRNC -0.84%) and its earnings report, released on Nov. 22 before the market opened. Here are some highlights from the video.

  1. Cerence's stock price dropped over 20% on Nov. 22, after the company reported earnings. One of the causes for the price drop was the weak guidance management gave for the upcoming quarter and upcoming fiscal year. A significant driving force for the weak guidance is the weak automotive production expected in the forthcoming year. 
  2. Cerence is a company that focuses on conversational artificial intelligence solutions for the automotive market. The solutions are mainly for traditional four-wheelers, but Cerence is expanding into the two-wheeler and other markets outside of the automotive industry. During Cerence's most recent quarter, the company announced its first major customer win in the elevator business. 
  3. Cerence reported $98.1 million in revenue, up 7.5% year over year. The growth of this company has currently hit headwinds due to automotive production. Regardless, management has been able to improve financial metrics. Cash flow from operations margin has gone from 38% in 2020 to 48% in 2021, and is expected to reach 51% in 2022. 

Click the video below for my full thoughts and analysis. 

*Stock prices used were the midday prices of Nov. 22, 2021. The video was published on Nov. 22, 2021.

Jose Najarro owns shares of Cerence Inc. The Motley Fool recommends Cerence Inc. The Motley Fool has a disclosure policy. Jose is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.