Bearish: Analysts Just Cut Their Cerence Inc. (NASDAQ:CRNC) Revenue and EPS estimates

The latest analyst coverage could presage a bad day for Cerence Inc. (NASDAQ:CRNC), with the analysts making across-the-board cuts to their statutory estimates that might leave shareholders a little shell-shocked. Revenue and earnings per share (EPS) forecasts were both revised downwards, with analysts seeing grey clouds on the horizon.

Following this downgrade, Cerence's twelve analysts are forecasting 2023 revenues to be US$374m, approximately in line with the last 12 months. Statutory earnings per share are supposed to crater 98% to US$0.02 in the same period. Before this latest update, the analysts had been forecasting revenues of US$420m and earnings per share (EPS) of US$1.26 in 2023. It looks like analyst sentiment has declined substantially, with a measurable cut to revenue estimates and a large cut to earnings per share numbers as well.

View our latest analysis for Cerence

It'll come as no surprise then, to learn that the analysts have cut their price target 14% to US$36.80. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. Currently, the most bullish analyst values Cerence at US$65.00 per share, while the most bearish prices it at US$27.00. As you can see the range of estimates is wide, with the lowest valuation coming in at less than half the most bullish estimate, suggesting there are some strongly diverging views on how think this business will perform. As a result it might not be possible to derive much meaning from the consensus price target, which is after all just an average of this wide range of estimates.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Cerence's past performance and to peers in the same industry. We would highlight that sales are expected to reverse, with a forecast 0.3% annualised revenue decline to the end of 2023. That is a notable change from historical growth of 11% over the last three years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 13% annually for the foreseeable future. It's pretty clear that Cerence's revenues are expected to perform substantially worse than the wider industry.

The Bottom Line

The biggest issue in the new estimates is that analysts have reduced their earnings per share estimates, suggesting business headwinds lay ahead for Cerence. Regrettably, they also downgraded their revenue estimates, and the latest forecasts imply the business will grow sales slower than the wider market. With a serious cut to next year's expectations and a falling price target, we wouldn't be surprised if investors were becoming wary of Cerence.

Even so, the longer term trajectory of the business is much more important for the value creation of shareholders. We have estimates - from multiple Cerence analysts - going out to 2024, and you can see them free on our platform here.

Another way to search for interesting companies that could be reaching an inflection point is to track whether management are buying or selling, with our free list of growing companies that insiders are buying.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.