Cerence (CRNC) Stock Forecast & Price Target

Cerence Inc. demonstrates a positive financial outlook largely due to its increased Deferred Revenue, which is expected to bolster future growth in this area. The company's Professional Services gross margins have exceeded expectations, reaching 32.7%, and are anticipated to contribute to a significant year-over-year doubling of EPS by FY27 alongside moderate growth in Connected Services. Furthermore, renewed focus from the sales team on Billings and New AI Deals, in addition to robust OEM partnerships and positive management insights, further enhances confidence in Cerence's ability to drive revenue growth moving forward.

Cerence Inc. is facing a challenging outlook due to a significant reduction in projected gross margins for its Connected Services segment, which are expected to stabilize at around 47% through early fiscal year 2025, down from earlier expectations of 56% to 61%. Additionally, declining sales estimates for 2024, coupled with the potential impact of a global recession on automobile sales, raise concerns about revenue stability, as consumers may defer new car purchases or opt for lower-end vehicles that lack advanced AI voice assistant capabilities. The company's current trading position also reflects underperformance compared to peers, with an enterprise value to sales multiple anticipated to fall below historical averages amidst these trends.