On Monday, Canaccord Genuity adjusted its stock price target for Five9, Inc (NASDAQ:FIVN), a leading provider of cloud contact center solutions, lowering it to $75 from the previous $90 while still maintaining a Buy rating on the stock.
The adjustment reflects a more cautious outlook amidst a challenging macroeconomic environment, although the firm's long-term growth prospects are still viewed positively.
The revision comes after a period of slower growth for Five9 compared to its peers. However, Canaccord emphasized the company's strong performance in the past, particularly highlighting the second-best enterprise bookings quarter ever recorded in Q2/23, surpassed only by a significant $40 million deal in the healthcare sector during Q1/22.
Despite recent quarters being described as "fine, not great," the analyst noted that Five9's management remains optimistic about the pipeline and activity levels.
Canaccord's analyst pointed out the importance of cloud-based solutions for contact centers, a view reinforced by the COVID-19 pandemic. Moreover, the integration of artificial intelligence is seen as a key driver for the acceleration of cloud migration decisions. While acknowledging that macroeconomic factors are currently impeding growth for the installed base, the analyst suggested that this headwind is temporary.
Five9's guidance for 16% growth in 2024 is perceived as conservative by Canaccord, citing historical trends that suggest the first quarter often results in a significant beat on expectations. The firm projects that Five9 could end the year with a growth rate in the low- to mid-20% range, which might lead to an expansion of the stock's multiple from current levels.
The current valuation stands at 4.1x enterprise value to revenue (EV/R) and 37x enterprise value to free cash flow (EV/FCF) based on calendar year 2024 estimates, with a Rule of 40 score of 27% for the same period.
InvestingPro Insights
As Five9, Inc (NASDAQ:FIVN) navigates through the shifting economic landscape, data from InvestingPro reflects interesting facets of the company's financial status and market sentiment. According to real-time metrics, Five9's market capitalization stands at $4.22 billion, indicating its substantial size in the cloud contact center market.
Despite facing profitability challenges with a negative P/E ratio of -50.47 based on the last twelve months as of Q4 2023, there are signals of a turnaround, with net income expected to grow this year. This aligns with Canaccord Genuity's long-term positive view on the company.
InvestingPro Tips highlight that 18 analysts have revised their earnings upwards for the upcoming period, suggesting a consensus that Five9's financial health may be on the upswing. Moreover, the company's liquid assets surpassing short-term obligations is a reassuring sign of financial stability, which is crucial during uncertain economic times.
For readers looking to dive deeper into Five9's performance and future prospects, there are additional InvestingPro Tips available, which can be explored at Investing.com/pro/FIVN. To access these insights, use the coupon code PRONEWS24 for an extra 10% off a yearly or biyearly Pro and Pro+ subscription.
Overall, these data points and tips provide a nuanced understanding of Five9's current situation and future potential, complementing the analysis provided by Canaccord Genuity and offering investors a more comprehensive view of the company's prospects.
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