Barclays lowers NICE stock price target to $200 on sector multiple compression

Investing.com - Barclays has lowered its price target on NICE Systems Ltd (NASDAQ:NICE) to $200.00 from $226.00 while maintaining an Overweight rating, citing multiple compression in the sector despite strong fundamentals. According to InvestingPro data, NICE currently trades at $127.85, near its 52-week low of $127, with analysis suggesting the stock is significantly undervalued. The company maintains a "GREAT" financial health score of 3.02 out of 4.

NICE reported revenues exceeding both Barclays’ estimates and Bloomberg consensus, with gross profit and operating profit showing year-over-year improvement. The company’s cloud growth reached 12%, while AI/Self-service revenues increased 42% compared to the second quarter of 2024. InvestingPro data reveals impressive fundamentals, including a 67% gross profit margin and 11.39% revenue growth over the last twelve months. Get access to 12 additional ProTips and comprehensive analysis with an InvestingPro subscription.

For the upcoming quarter, NICE’s guidance implies 5% year-over-year top-line growth and 10% year-over-year EPS growth. Management maintained its 7% revenue growth outlook for the year while raising EPS guidance by 40 basis points at the midpoint. The company’s strong financial position is evident in its metrics, with more cash than debt on its balance sheet and a healthy current ratio of 1.83x.

Barclays noted that NICE shares have declined 19% year-to-date compared to the Nasdaq’s 13% gain, reflecting investors’ concerns about AI disruption. The firm views NICE’s CCaaS (Contact Center as a Service) value proposition as intact and believes the company is well-positioned to benefit from industry trends toward unified platforms, cloud transformations, and increasing adoption of digital and AI enhancements. InvestingPro’s analysis shows the stock trading at an attractive P/E ratio of 17.33x relative to its growth prospects, with a PEG ratio of just 0.68x.

NICE is expanding partnerships with Ring Central and Salesforce, and its acquisition of Cognigy, expected to close in the fourth quarter, will potentially add conversational and agentic capabilities to the company’s platform. The next catalyst for the stock will be NICE’s CMD in October, where the company will provide more financial details and its mid-term outlook. Dive deeper into NICE’s financial health, valuation metrics, and growth prospects with a comprehensive Pro Research Report, available exclusively on InvestingPro.

In other recent news, NICE Systems reported second-quarter revenue of $726.7 million, surpassing analyst expectations of $713.2 million. The company’s cloud revenue increased to $540.8 million, marking a 12.3% year-over-year growth. Notably, AI and self-service revenue accelerated to 42%, reaching $238 million in annual recurring revenue. Product revenue, particularly from Financial Crimes solutions, rose by 29.4% to $45.4 million, exceeding analyst estimates of $28.1 million. Despite these positive results, DA Davidson lowered its price target for NICE to $150, citing churn from LiveVox. Meanwhile, Morgan Stanley adjusted its price target to $193 due to delayed growth acceleration, while still maintaining an Overweight rating. NICE also announced an expanded partnership with Salesforce to enhance AI-driven customer experience integration. Additionally, NICE and RingCentral extended their partnership, focusing on AI-powered communications solutions.

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