On Wednesday, Piper Sandler maintained its Overweight rating for Five9, Inc. (NASDAQ:FIVN) with a steady price target of $47.00. The firm's outlook remains positive, emphasizing the potential advantages for Five9 and other Contact Center as a Service (CCaaS) providers due to the ongoing shift towards AI and automation technologies in the contact center sector.
This technological transition is expected to benefit enterprises seeking the full advantages of AI, which will likely necessitate a move to cloud-based services.
During recent meetings with Five9's CEO Rowan Trollope and CFO Barry Zwarenstein, Piper Sandler gained insights into the company's direction and challenges.
The past couple of years have been described as particularly arduous, likened to "rolling an 800-pound ball up a mountain." Nevertheless, the firm remains confident in the company's future prospects, especially in light of the industry's gradual embrace of AI and automation.
Piper Sandler also addressed Five9's financial outlook, suggesting that the fiscal year 2024 (FY24) guidance may have been set with conservative estimates, a strategy commonly referred to as "kitchen-sinking." This implies that the company has accounted for potential risks and challenges in its projections.
However, any guidance for fiscal year 2025 (FY25) that is expected to be released next quarter is anticipated to be met with skepticism unless it is accompanied by significant outperformance.
Furthermore, the firm noted that Five9's management has recognized the importance of margins, as evidenced by the recent Reduction in Force (RiF) announcement. This strategic move is seen as a step towards improving Five9's earnings before interest and taxes (EBIT) and free cash flow (FCF) for fiscal years 2025 and 2026. Piper Sandler's reiterated Overweight rating and price target reflect a continued endorsement of Five9's stock amidst these developments.
In other recent news, Five9 Inc . confirmed plans to reduce its global workforce by approximately 7% by the end of 2024, a strategic move projected to cost between $12 million and $15 million.
Despite this, Needham maintained its Buy rating on Five9's stock with a price target of $48.00. The firm has adjusted its estimated GAAP EPS for the third quarter to a loss of $0.21 per share, and the full-year GAAP EPS estimate to a loss of $0.45 per share.
In financial highlights, Five9 reported an annual revenue run rate exceeding $1 billion in Q2, with a robust adjusted EBITDA margin of 17% contributing to a strong operating cash flow of $126 million. However, due to customer budget constraints, the company revised its annual revenue guidance downward by 3.8%.
Five9 also announced the acquisition of Acqueon, a firm specializing in proactive outbound omnichannel customer engagement, to expand its AI offerings. BTIG maintained a Buy rating on Five9, emphasizing the company's strategic position in the digital shift in customer engagement practices.
Five9 is focusing on managing expenses and improving profitability in the second half of the year, with initiatives like FedRAMP and expansion into India anticipated to improve gross margins.
InvestingPro Insights
Piper Sandler's optimistic stance on Five9, Inc. (NASDAQ:FIVN) is echoed by several metrics and InvestingPro Tips that highlight the company's potential amidst the technological transition in the contact center sector. Notably, analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's financial trajectory. Moreover, Five9's liquid assets exceed its short-term obligations, providing a cushion for operational flexibility and investment in growth opportunities such as AI and automation.
Although the stock has experienced significant price declines over various timeframes, including a 51.66% drop over the last year, this could present a buying opportunity for investors who believe in the company's long-term strategy and market position. Additionally, the company's revenue growth remains robust, with a 14.18% increase over the last twelve months as of Q2 2024, and a gross profit margin of 52.85%, underscoring the company's ability to generate earnings relative to its revenue.
For investors seeking more comprehensive analysis, there are over 10 additional InvestingPro Tips available on Five9, which can be accessed for deeper insights into the company's performance and outlook. These include expectations of net income growth this year and predictions that the company will be profitable, which could be pivotal information for those considering an investment in Five9.
Investors interested in exploring these insights further can find them on InvestingPro, with additional tips that may influence investment decisions and provide a clearer picture of Five9's financial health and market potential.
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