Cerence Stock is Repricing Itself

Artificial intelligence (AI) mobility and virtual assistants solutions provider Cerence NASDAQ: CRNC stock has been decimated since the IPO highs. The Company provides AI-powered virtual assistants for companies and especially in the automotive industry. Cerence envisions the complete digitization of cars as its virtual assistants help to improve all aspects of performance, entertainment, and help bridge the digital life from home to vehicle. The Company believes the car is not just a mode of transportation but is transforming into a tool to improve lifestyles in a connected world. The global chip shortage and supply chain disruption is causing its clients to cut back on production in the near-term further complicated by Omicron, which won’t be resolved until possibly latter part of the year. Prudent investors seeking exposure into the evolution of the digitized mobility can watch for opportunistic pullbacks in shares of Cerence.

Fiscal Q1 2022 Earnings Release

On Feb. 7, 2022, Cerence released its fiscal first-quarter 2022 results for the quarter ended December 2021. The Company reported an earnings-per-share (EPS) profit of $0.59 versus $0.51 consensus analyst estimates, a $0.08 beat. Revenues fell (-0.6%) year-over-year (YoY) to $94.4 million, missing analyst estimates for $95.1 million. The Company reported the second-largest bookings ever in the quarter and won another China-based two-wheeler customer. Cerence CEO Stefan Ortmanns commented, “We had a strong start to the fiscal year. Our results underscore the strength of our business and reinforces Cerence as the global leader in unique, moving experiences for the mobility world. We’ve delivered important innovations and leading AI mobility solutions to customers in key markets, and our employees have demonstrated great commitment to supporting our customers and each other.”

Downside 2022 Guidance 

Cerence provided fiscal Q2 2022 revenue guidance in line coming in between $56 million to $58 million versus $56.18 million consensus analyst estimates. The Company sees fiscal full-year 2022 revenues between $243 million to $247 million versus $245.36 million.

Conference Call Takeaways

CEO Ortmanns addressed changes in leadership as its prior CEO abruptly stepped down in the quarter as one of the contributing factors for lowered guidance in the near-term while positioning to drive longer-term growth. He feels that mobility is evolving rapidly especially in the automotive industry as electrification hits commercial scale in 2022. Electric vehicles (EV) are mainstreaming across the world, especially in China where 15% of all new cars sold are electric. He expects this to be the tipping point to “accelerate the complete digitization of the car”. He elaborated on the vision of car digitization, “Digitization will create new opportunities and challenges. In response, global automakers will accelerate the deployment of new innovation and adapt to changing consumer demand and regulatory developments. By the end of this decade, we believe the car will be fully and commercially redefined as a mobility solution, powered by two key platforms that work seamlessly together: autonomous driving and the digital cockpit and cabin. A fully digital cockpit and cabin will transform the experience for both drivers and passengers in a car. It will make possible much more than a driver simply speaking commands. It will make possible convenient, enjoyable, and safe experiences for drivers and passengers, especially as our vehicles bridge our digital lives. It will create not just an enhanced driving experience, but also include the apps, content, and services we use daily on our phones, in our homes and at work. These new capabilities will certainly occur inside the vehicle, where Cerence today already excels for in-car experiences.” Cerence will benefit from the use of its AI-powered virtual assistants will be a key component of this evolution. He explains, “They will also increasingly factor in elements outside the vehicle such as the interactions with other cars, billboards, city infrastructure, pedestrians and more. Taken together, Cerence will lead the way in cabin, driver and road AI to keep the driver informed, passengers entertained and cars on the road safe.”

CRNC Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for CRNC stock. The weekly rifle chart visualized the magnitude of the dramatic sell-off from the peak near the $84.91 Fibonacci (fib) level. The weekly downtrend has a 5-period moving average (MA) falling at $53.44 followed by the 15-period MA falling at $71.95. The weekly lower Bollinger Bands (BBs) sit at $28.76. The weekly market structure low (MSL) buy triggers on a breakout above $42.77. The daily rifle chart has an inverse pup breakdown with a falling 5-period MA at $42.33 and 15-period MA at $51.25 with daily lower BBs at $29.31. Prudent investors can monitor for opportunistic pullback levels at the $37.44, $34.33 fib, $29.95 fib, $27.51, $25.57 fib, $23.11 fib, and the $19.33 fib level. Upside trajectories range from the $48.51 fib level up towards the $64.71 fib level.