Today's video focuses on Cerence (CRNC +3.44%) and an update on its recent earnings reported on Feb. 7. Unfortunately, Cerence's stock price has seen better days. After it reported earnings, announcing a leadership change and lowering guidance, the company's stock price plummeted over 30%. Here are some highlights from the video.
- Management believes the company is still fundamentally strong. Management stated that Cerence entered this fiscal year with over $2 billion in total backlog. Roughly 52% of new vehicles shipped in the trailing 12 months are using some form of Cerence technology.
- When uncertainties increase, valuation decreases, which is what is happening with Cerence. In the past few months, two top managers have left. The CEO stepped down in December, and during the earnings call, we learned that the CFO will be retiring. Change in leadership is not necessarily a negative thing, but it does bring uncertainty to investors' minds.
- Full-year guidance lowered by roughly 9% at midpoint compared to the company's prior guidance. Three main components drove the change. First, automakers are experiencing an interruption in production due to factory shutdowns and labor shortages from the rise of COVID variants. Second, the semiconductor shortages continue. Finally, several onetime technology license opportunities expected to close this year have been pushed back. Management believes these opportunities remain, they'll just take longer to be realized.
Click the video below for my full thoughts and analysis.
*Stock prices used were the midday market prices of Feb. 9, 2022. The video was published on Feb. 9, 2022.
