On Wednesday, Canaccord Genuity maintained its Buy rating on Five9, Inc (NASDAQ:FIVN), a provider of cloud software for contact centers, with a steady price target of $60.00. Five9's stock is considered undervalued by the firm, trading at approximately 2 times its expected enterprise value to revenue (EV/R) and around 20 times its expected enterprise value to free cash flow (EV/FCF) for the calendar year 2025.
The firm's position is based on the belief that Five9 is not a "broken business," contrary to what its current valuation might suggest. Canaccord Genuity sees several long-term growth catalysts within the Contact Center as a Service (CCaaS) industry. It is noted that less than 25% of the industry has transitioned to cloud-based solutions, with an even smaller percentage among enterprises.
Furthermore, the advancement of Generation AI (GenAI) tools is said to be driving migrations to the cloud and creating opportunities for cross-selling. Five9 is recognized as one of the few enterprise-level players well-positioned to take advantage of these industry shifts. The firm suggests that, with reset estimates and the stock appearing to be at a low point, Five9 represents an attractive opportunity for patient investors.
Canaccord Genuity's outlook is optimistic about the future growth and profitability of Five9. They argue that better days are ahead for the company, reinforcing their unchanged Buy rating. The firm's analysis indicates that Five9 should be on the radar of investors who are willing to wait for the realization of its growth potential.
In other recent news, cloud contact center provider Five9 has made several significant moves. The company announced the appointment of Ajay Awatramani as its new Chief Product Officer, signaling a continued focus on enhancing its AI-powered customer experience offerings. Five9 also reported revenues of $910.5 million in 2023 and achieved an annual revenue run rate exceeding $1 billion in Q2. However, due to customer budget constraints, the company revised its annual revenue guidance downward by 3.8%.
Five9 has been targeted by Legion Partners Asset Management for board changes and cost reductions, following a similar move by Anson Funds Management. In a bid to improve profitability, the company also confirmed plans to reduce its global workforce by approximately 7% by the end of 2024.
The company expanded its operations in India with two new data centers in Delhi and Mumbai, enhancing its services for enterprises focusing on customer experience strategies within the region. Furthermore, Five9 acquired Acqueon, a firm specializing in proactive outbound omnichannel customer engagement, to expand its AI offerings.
Analysts from Piper Sandler, Needham, and BTIG have maintained positive ratings for Five9. Piper Sandler kept its Overweight rating with a price target of $47.00, while Needham and BTIG both maintained their Buy ratings, with price targets of $48.00 and $45.00, respectively.
InvestingPro Insights
Recent InvestingPro data provides additional context to Canaccord Genuity's optimistic outlook on Five9, Inc (NASDAQ:FIVN). Despite the company's current challenges, including not being profitable over the last twelve months, InvestingPro Tips suggest that net income is expected to grow this year, aligning with the firm's positive long-term view. This expectation is further supported by 20 analysts revising their earnings upwards for the upcoming period.
The company's financial health appears stable, with InvestingPro data showing that liquid assets exceed short-term obligations and Five9 operates with a moderate level of debt. This financial position could provide the company with the flexibility needed to capitalize on the growth opportunities in the CCaaS industry, as highlighted in the article.
However, investors should note that Five9's stock has taken a significant hit over the last year, with a 52.23% price decline. This aligns with Canaccord Genuity's assessment that the stock is currently undervalued, potentially offering an entry point for patient investors.
For a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide deeper insights into Five9's investment potential. These tips, along with real-time financial metrics, can help investors make more informed decisions in line with the article's discussion of Five9's market position and growth prospects.
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