Our current technical analysis of Cerence (NASDAQ:CRNC)

As many millenniums are trying to avoid technology space, it makes sense to go over Cerence a little further and try to understand its current market patterns. As expected, Cerence is starting to reaffirm its true potential as investors are becoming more and more confident in the future outlook. The returns on the market and returns on Cerence appear slightly correlated for the last few months. Weak basic indicators of the company may also suggest signs of long term losses for Cerence investors. Cerence is scheduled to announce its earnings today.
Published over a year ago
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Reviewed by Raphi Shpitalnik

This firm's average rating is Buy from 6 analysts. Do analysts base this consensus on technical analyses? We know that typical technical analysis utilizes price momentum, patterns, and trends looking at historical prices. It aims to identify signals based on Cerence market sentiment investors' perception of the future value of Cerence. Let us look at a few aspects of Cerence technical analysis.
Using predictive technical analysis, we can analyze different prices and returns patterns and diagnose historical swings to determine the real value of CerenceInc. In general, sophisticated investors focus on analyzing CerenceInc stock price patterns and their correlations with different microeconomic environment and drivers. They apply predictive analytics to build CerenceInc's daily price indicators and compare them against related drivers such as momentum indicators and various other types of predictive indicators. Using this methodology combined with a more conventional technical analysis and fundamental analysis, we attempt to find the most accurate representation of CerenceInc's intrinsic value. In addition to deriving basic predictive indicators for CerenceInc, many experienced traders also check how macroeconomic factors affect CerenceInc price patterns. Please read more on our technical analysis page or use our predictive modules below to complement your research.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of CerenceInc's price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
Please note, it is not enough to conduct a financial or market analysis of a single entity such as CerenceInc. Your research has to be compared to or analyzed against CerenceInc's peers to derive any actionable benefits. When done correctly, CerenceInc's competitive analysis will give you plenty of quantitative and qualitative data to validate your investment decisions or develop an entirely new strategy toward taking a position in CerenceInc.

How important is CerenceInc's Liquidity

CerenceInc financial leverage refers to using borrowed capital as a funding source to finance CerenceInc ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. CerenceInc financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to CerenceInc's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of CerenceInc's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between CerenceInc's total debt and its cash.

Closer look at Cerence Downside Variance

Cerence has current Downside Variance of 14.45. Downside Variance (or DV) is measured by target semi-variance and is termed downside volatility. It is expressed in percentages and therefore allows for rankings in the same way as variance. One way to view downside volatility is the annualized variance of returns below the target.
Downside Variance is the probability-weighted squared below-target returns. The squaring of the below-target returns has the effect of penalizing failures at an exponential rate. This is consistent with observations made on the behavior of individual decision-making under.
Downside Variance 
 = 
SUM(RET DEV)2 
N(ER) 
 = 
14.45
SUM = Summation notation
RET DEV = Actual returns deviation over selected period
N(ER) = Number of points with returns less than expected return for the period
Let's now compare Cerence Downside Variance to its closest peers:
CRNC
EB
JG
KC
DOCU
CRNC14.449042751544294
EB10.22
JG19.73
KC17.87
DOCU19.48

Our perspective of the current Cerence rise

Mean deviation is down to 3.17. It may suggest a possible volatility slip. Cerence shows above-average downside volatility for the selected time horizon. We advise investors to inspect Cerence further and ensure that all market timing and asset allocation strategies are consistent with the estimation of Cerence future alpha.

Our Conclusion on Cerence

Whereas some firms under the software—application industry are still a bit expensive, Cerence may offer a potential longer-term growth to investors. The bottom line, as of the 16th of November 2020, our analysis shows that Cerence almost neglects market trends. The company is overvalued and projects low probability of distress for the next 2 years. Our final 30 days buy-or-sell advice on the company is Strong Sell.

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Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of CerenceInc. Please refer to our Terms of Use for any information regarding our disclosure principles.

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