We recently published a list of 15 Worst 52-Week Low Stocks to Buy Now According to Short Sellers. In this article, we are going to take a look at where Cerence Inc. (NASDAQ:CRNC) stands against the other worst 52-week low stocks to buy now according to short sellers.
The U.S. Federal Reserve conducting a 50 basis point interest rate cut was the catalyst that stocks needed to bounce back from a period of stagnation. After weeks and months of uncertainty about what the Fed would do, certainty is slowly creeping into the market, helping bolster investor sentiments.
With the S&P 500 back to record highs, it’s the Nasdaq 100 that appears to be making the most significant moves, having gained more than 3% in the aftermath of the 50 basis point interest rate cut. The spike in the tech-heavy U.S. index is a clear indicator that tech stocks are well poised to edge higher after weeks of stagnation.
The interest rate cut is expected to positively impact short-term bank borrowing costs, making it easy for people and businesses to access cheap capital to fuel economic activity that has been slowing in recent months. Additionally, it should positively impact various consumer products like mortgages, auto loans, and credit cards.
While there were concerns that the U.S. economy was slowing due to disappointing employment data and a slowdown in the manufacturing sector, Fed Chair Jerome Powell reiterated that the 50 basis point cut was all about ‘recalibrating’ the economy.
Initially, there were concerns that the FED coming through with a 50 basis point would fuel fears about the health of the U.S. economy and consequently rattle stocks. However, that was not the case as stocks rallied, signaling that investors were optimistic about the economy and long-term outlook in the market.
Tom Porcelli, top U.S. economist at PGIM Fixed Income Policy, thinks the Fed policy was set up to handle much more inflation. Now that inflation is getting close to the target, the Fed can start to ease off on the tight money they’ve been applying. Consequently, the aggressive interest rate cut is not because we’re heading into a recession but because we want to keep the economic growth going.
While the focus will be on stocks that have been edging higher for the year, the focus is slowly shifting to stocks that have bottomed and that market participants are bearish on. Stocks that have been battered to 52-week lows are increasingly turning out to be bargains, especially on the monetary policy improving after months of uncertainty. Nevertheless, it is unclear whether stocks with high short interest rates will bounce back after coming under immense pressure over the past nine months.
With the Fed cutting interest rates with a bang, CNBC commentator and Fast Money host Jim Cramer believes investors should start paying attention to stocks well poised to benefit from a low interest rate environment. Some stocks to consider are companies providing products and services that depend on consumers’ purchasing power.
Our Methodology
We used the Finviz screener to find stocks that were trading near their 52-week lows and that had high short interest (at least 5%). We then picked the stocks with the highest short interest and ranked them in ascending order of this metric. We have also added the hedge fund sentiment for these stocks.
At Insider Monkey, we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A man with an AI powered virtual assistant, demonstrating the coexistence of the two.
Cerence Inc. (NASDAQ:CRNC)
52 Week Range: $2.34 – $21.66
Current Share Price: $2.68
Short % of Shares Outstanding: 16.56%
Number of Hedge Funds holding stakes as of Q2 2024: 14
Cerence Inc. (NASDAQ:CRNC) is a technology company that provides AI-powered virtual assistants for the mobility/transportation market. It offers edge software components, cloud-connected components, virtual assistant coexistence, and professional services. It also provides conversational artificial intelligence-based solutions
The leader in AI-driven automotive assistants has imploded to a 52-week low amid a challenging market environment. Slowing momentum in the automotive industry and stiff competition in the automotive Generative AI (GenAI) market, which affected CRNC’s top-line growth, are some of the reasons short sellers have continued piling pressure on the stock.
Consequently, short interest on the stock has risen to 16.56%, a situation fuelled by Cerence Inc. (NASDAQ:CRNC) management lowering its fiscal revenue and EBITDA expectations. The company’s withdrawal of its multi-year forecast through 2027 has also raised doubts about its long-term prospects.
Cerence Inc. (NASDAQ:CRNC)’s guidance shows a decrease of about 11% to $40 million and an expected EBITDA of $65 million, a significant drop compared to the earlier forecasted $102 million. The cut has since resulted in the stock imploding to its 52-week lows. Concerns about future growth are one of the reasons Cerence remains one of the worst 52-week low stocks to buy now, according to short-sellers.
Nevertheless, Cerence Inc. (NASDAQ:CRNC) finds itself well-positioned to take advantage of progress in GenAI, an expanding customer base, and a robust network of partners. Its partnership with Skoda, a recognized brand under Volkswagen, stands out as the agreement is focused on improving the driving experience by merging Cerence Chat Pro with Skoda’s in-vehicle voice assistant, Laura.
As of the end of the second quarter, 14 hedge funds in Insider Monkey’s database of 912 funds held stakes in Cerence Inc. (NASDAQ:CRNC), compared to 11 hedge funds in the first quarter.
Overall CRNC ranks 2nd on our list of worst 52-week low stocks to buy now according to short sellers. While we acknowledge the potential of CRNC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRNC, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
