On Wednesday, Piper Sandler adjusted its price target on shares of Five9, Inc (NASDAQ:FIVN), a leading provider of cloud contact center solutions, to $58.00 from the previous target of $86.00. Despite the reduction, the firm maintains an Overweight rating on the stock.
The revision of the price target to $58.00 is based on a 3.5 times enterprise value to the calendar year 2025 estimated sales (EV/CY25E Sales) of $1.23 billion. This valuation includes $24 million in net cash and accounts for 75 million shares outstanding. The new target suggests an EV/Revenue/Growth multiple of 0.2 times and anticipates a mid-20s free cash flow (FCF) percentage.
Piper Sandler's decision to lower the price target comes after a reassessment of Five9's future performance, particularly a reduction in the company's expected compound annual growth rate (CAGR). The firm now projects a 15% CAGR for Five9, down from the previous estimate of 19%. This adjustment is primarily due to a forecasted decrease in Net Revenue Retention (NRR) to 110-112% for the years 2025-2026.
The market had been anticipating a reduction in growth rate to the 12-14% range, which is reflected in the revised multiple of 3.5 times, down from the prior multiple of 5 times. Despite the lowered expectations, Piper Sandler noted that Five9 had favorable checks, indicating that the company's business still has positive aspects that support the Overweight rating.
In other recent news, Five9 has experienced some significant developments.
Deutsche Bank (ETR:DBKGn) has expressed concern over the company's revenue growth, lowering the stock price target from $80 to $65 while maintaining a Buy rating. This change stems from worries about the company's ability to meet its 2024 revenue targets due to a deceleration in revenue growth. Similarly, Wells Fargo (NYSE:WFC) has also reduced Five9's price target, though it maintains an Overweight rating, expecting re-accelerated revenue growth in 2024.
In addition to these analyst adjustments, Five9 has announced an enhanced collaboration with Salesforce (NYSE:CRM). This partnership aims to improve customer experiences through AI-powered solutions, assisting agents in servicing customer requests more effectively.
Turning to financials, Five9 reported a 20% year-over-year growth in subscription revenue and a 13% overall revenue increase, 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 hit $1.055 billion.
These are among the recent developments for Five9.
InvestingPro Insights
InvestingPro data indicates that Five9, Inc (NASDAQ:FIVN) has a market capitalization of approximately $3.09 billion, with a Price to Book (P/B) ratio of 6.39 as of the last twelve months ending Q1 2024. This P/B ratio suggests the stock is trading at a premium compared to the book value of its assets, which is consistent with the high valuation multiples noted by Piper Sandler. The company's revenue growth remains robust at 15.29% for the same period, aligning with Piper Sandler's projection of a 15% compound annual growth rate (CAGR) for Five9.
Moreover, an InvestingPro Tip highlights that analysts predict the company will be profitable this year, which may offer a positive outlook for investors considering the stock's recent price decline. The share price has experienced significant drops over the last three months, six months, and year-to-date, with a 50.14% decline over the past year, presenting potential value opportunities for investors.
For readers looking to delve deeper into Five9's financial health and future prospects, InvestingPro provides additional insights and tips. There are 10 more InvestingPro Tips available, which can be accessed by visiting: https://www.investing.com/pro/FIVN. To gain access to these valuable insights, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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