NEW YORK (TheStreet) -- Nuance Communications (NUAN) - Get Report bombed during Tuesday trading after a number of analysts downwardly revised price targets on management's decision to cut full-year 2014 forecasts.
By market close, shares had crashed 18.1% to $13.10. Year to date, the stock has fallen 41.3%.
Oppenheimer reiterated its "outperform" rating but cut its price target to $22 from $23. The investment firm said while guidance disappointed, it expects a growing level of activism, particularly from investor Carl Icahn who holds a 16.7% stake in the company, to be a positive near-term catalyst to lift share prices.
Canaccord remained positive, reiterating a "buy" rating and $22 price target. The firm said Nuance is worth buying and holding onto over the next 12 to 18 months as the bears discount share prices.
Wedbush Securities was one of the few to lower both its rating (to "neutral" from "outperform) and price target (to $15 from $22), on the view the company's shift to cloud-based services in mobile and enterprise is creating undue risk and that additional investments are putting pressure on margins.
On Monday, the communications software company slashed its fiscal 2014 forecast. Nuance management expects net income between $1.05 and $1.15 a share and revenue in the range of $2.03 billion to $2.09 billion. Analysts surveyed by Thomson Reuters were looking for earnings of $1.41 a share on revenue of $2.08 billion.
For its first quarter ending December, the Burlington, Mass.-based business anticipates earnings of 18 cents to 21 cents a share and revenue between $477 million and $487 million. First-quarter estimates missed consensus of 33 cents a share on revenue of $494.74 million.
Fourth-quarter net income of 30 cents a share beat expectations by a penny, while revenue of $490.39 million was $830,000 higher than consensus. This was the second consecutive quarter Nuance has beat expectations only to disappoint investors with lower-than-expected guidance.
Management said lower profitability was a near-term result of the company's move to offer cloud and subscription-based sales over up-front licenses.
"We are embracing this transition despite its effect on near-term revenues because our customers are demanding it and because we value the recurring nature, predictability and longevity of these revenue streams," said CEO Paul Ricci during a conference call.
TheStreet Ratings team rates Nuance Communications Inc as a Hold with a ratings score of C. The team has this to say about its recommendation:
"We rate Nuance Communications Inc (NUAN) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and expanding profit margins. However, as a counter to these strengths, we also find weaknesses including a generally disappointing performance in the stock itself, deteriorating net income and disappointing return on equity."
- You can view the full analysis from the report here: NUAN Ratings Report