On Monday, Deutsche Bank (ETR:DBKGn) reaffirmed its Buy rating on shares of Five9, Inc (NASDAQ:FIVN), with a steady price target of $65.00. The firm's outlook remains positive despite the stock's challenging performance at the beginning of the year, marked by investor concerns over the company's revenue targets for 2024 and increasing competition in the sector.
The analyst from Deutsche Bank acknowledged the rough start for Five9 shares this year, attributing the downturn to doubts about the company's revenue goals for 2024, which suggest a significant increase in the second half of the year. Moreover, there are ongoing questions about the impact of rising competition and the long-term risks posed by the adoption of AI-enabled solutions in the industry.
Despite these challenges, Deutsche Bank sees an attractive risk/reward balance at the current share price levels. This perspective is bolstered by what the firm perceives as a general investor disinterest towards Five9 specifically, and the broader Unified Communications as a Service (UCaaS) and Contact Center as a Service (CCaaS) market in recent months.
The $65 price target set by Deutsche Bank is derived from an average of three valuation methods. The first is a Discounted Cash Flow (DCF) analysis, which suggests a value of $71 per share based on a 9.9% Weighted Average Cost of Capital (WACC) and a 4.0% terminal growth rate.
The second method is an Enterprise Value to EBITDA (EV/EBITDA) approach, resulting in a $62 valuation using a multiple of 27 times the estimated 2024 EV/EBITDA, equivalent to 20 times the projected 2025 figure. Lastly, a Price to Free Cash Flow (P/FCF) valuation indicates a $61 per share value, applying a 45 times multiple to the estimated 2024 Free Cash Flow per share.
In other recent news, cloud contact center provider Five9 has been the subject of analysis by Deutsche Bank and Wells Fargo (NYSE:WFC). Deutsche Bank lowered its price target for the company to $65, citing concerns about slowing revenue growth and uncertainty about meeting 2024 revenue targets.
Still, the bank maintained a Buy rating on the stock. Similarly, Wells Fargo reduced its price target to $80, despite maintaining an Overweight rating, based on an evaluation of Five9's near-term prospects.
Five9 also announced an enhanced collaboration with Salesforce (NYSE:CRM) to improve customer experiences with AI-powered solutions. This integration aims to assist agents in servicing customer requests more effectively.
In terms of financial performance, Five9 reported a 20% year-over-year growth in subscription revenue and a 13% increase in overall revenue, reaching $247 million in the first quarter. The company projects a revenue of $244.5 million for the second quarter, and full-year 2024 revenue is expected to reach $1.055 billion. These recent developments highlight the ongoing dynamics within Five9.
InvestingPro Insights
As Deutsche Bank maintains a bullish stance on Five9, Inc (NASDAQ:FIVN), real-time data and insights from InvestingPro can provide additional context for investors. The company's market capitalization stands at $3.09 billion, reflecting its position within the industry. While Five9 has been grappling with profitability, as indicated by a negative P/E ratio of -49.28, analysts predict the company will turn profitable this year, which could be a pivotal moment for investor sentiment.
Despite recent price declines, with the stock having fallen by over 28% in the last three months, InvestingPro Tips suggest that Five9's liquid assets exceed short-term obligations, and it operates with a moderate level of debt, offering some financial stability.
Moreover, the company has experienced a revenue growth of 15.29% over the last twelve months as of Q1 2024, which may align with Deutsche Bank's positive outlook on revenue targets. These insights, along with the potential for net income growth, could be key factors for investors considering Five9's future prospects.
For those interested in a deeper analysis, InvestingPro offers additional tips on Five9, which can be accessed at https://www.investing.com/pro/FIVN. Readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription. There are 11 more InvestingPro Tips available, providing a comprehensive understanding of Five9's financial health and market position.
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