Oppenheimer: Nuance Communications Rebounding From Recent Cyberattack

By most benchmarks, Nuance Communications Inc. NUAN's fiscal fourth quarter earnings report came in better than anticipated across multiple metrics.

The Analyst

Oppenheimer's Shaul Eyal maintains an Outperform rating on Nuance's stock with an unchanged $23 price target.

The Thesis

Nuance's better-than-expected revenue was attributed to the company's "strong execution" and a smaller-than-expected impact from a June cyberattack, Eyal said in a Wednesday note. (See Eyal's track record here.) 

While net new bookings revenue of $424.4 million did fall 18 percent from a year ago, it was in part offset by strength across the Dragon Medical, Automotive and Enterprise divisions, the analyst said. 

Nuance's management reiterated its fiscal 2018 revenue guidance of 2-4 percent organic revenue growth and expects to see an operating margin of 26.5-27.0 percent, the analyst said. The company's fiscal 2019 guidance of 3-5 percent organic revenue growth and 50 basis points of operating margin improvements from 2018's level shows the company is investing in its growth and "quickly healing" from the cyber attack, Eyal said. 

"NUAN cushioned the impact from the recent cyber attack while exhibiting robust execution across high-growth segments, enabling the company to refocus on its potential in AI and cognitive solutions as FY18 unfolds." 

Price Action

Shares of Nuance gained more than 7 percent Wednesday morning but are still lower by around 9 percent over the past six months.

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