Wedbush downgrades Nuance Communications (NUAN) to Neutral from Outperform, lowering its price target to $15 from $22, saying the acceleration in business model transition and investments creates incremental risk heading into 2014.
"Nuance reported F4Q slightly ahead of estimates, but issued FY14 EPS guidance meaningfully below expectations. While the business model transition issues have been ongoing for some time: (1) shift toward cloud-based services in mobile and enterprise, (2) move toward EMR-based Dragon Medical sales in healthcare and away from cloud-based eScription, it appears the trends have accelerated, creating incremental visibility concerns and risk heading into FY14. At the same time, Nuance is ramping investments in several areas, putting additional pressure on margins. With the continued uncertainty associated with the business model shifts, limited forward visibility into revenue and margins, and lack of near-term catalysts, we are lowering our rating to Neutral."
NUAN closed at $15.99 yesterday, with a 52-week range of $15.34-24.85. Shares fell 5% after the close.