Robinhood shares gain on Q2 beat, as user and crypto growth accelerate
On Friday, Cantor Fitzgerald reaffirmed its Overweight rating on Five9, Inc (NASDAQ:FIVN) with a steady price target of $36.00. The endorsement follows Five9’s first quarter results for 2025, which surpassed expectations in terms of revenue and significantly outperformed in operating income and free cash flow (FCF). According to InvestingPro data, Five9 generated $100.78 million in levered free cash flow over the last twelve months, maintaining a healthy current ratio of 1.95x, indicating strong liquidity management. The positive outcomes come on the heels of the company’s operational review and a recent reduction in force (RIF) by 4%.
Five9’s management has observed consistent trends into April from the first quarter and has prudently revised its revenue guidance while increasing its earnings per share (EPS) forecast. This change is attributed to stringent cost management efforts and the role of artificial intelligence (AI) in driving bookings, particularly in the higher-end market segment which is contributing to expanding gross margins. InvestingPro analysis reveals a robust gross profit margin of 54.37% and projects the company will return to profitability this year, with analysts forecasting EPS of $2.64 for 2025.
The company has also introduced a new financial target of surpassing the Rule of 40 in the calendar year 2027 (C27), which combines adjusted EBITDA and approaching the Rule of 40 on a free cash flow basis within the same timeframe. This objective is supported by expectations of 10-15% revenue growth and 25-30% profit margins leading into C27. The company’s growth trajectory aligns with its historical performance, as InvestingPro data shows a impressive 5-year revenue CAGR of 26%, demonstrating consistent execution. For deeper insights into Five9’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers. Despite resetting its overall growth expectations, Five9 continues to experience robust growth in AI, which saw a 32% increase in the first quarter of 2025, and benefits from expanded partnerships and consistent growth in customer seats and average revenue per user (ARPU).
Cantor Fitzgerald’s analysis suggests that the contact center is crucial for the next-generation customer experience (CX) platforms. With all deals over $1 million in annual recurring revenue (ARR) now incorporating AI, strong partnerships with Salesforce.com (NYSE:CRM) and ServiceNow (NYSE:NOW), and the contact center industry still in the early stages of cloud transition, the firm believes the current valuation of less than 2 times next twelve months (NTM) sales accounts for the long-term risks of AI potentially reducing the need for contact center seats. The reiterated price target of $36 implies a 2.25 times multiple on Cantor Fitzgerald’s calendar year 2026 revenue estimates for Five9, which is below the one-year average multiple of 2.6 times. This valuation perspective is particularly interesting given that Five9 appears undervalued according to InvestingPro Fair Value analysis, despite its high EV/EBITDA multiple of 89.74x.
In other recent news, Five9, Inc. reported impressive financial results for the first quarter of 2025, with earnings per share reaching $0.62, surpassing the expected $0.49. The company’s revenue also exceeded expectations, coming in at $279.7 million compared to the anticipated $272.29 million. Notably, subscription revenue, which constitutes a significant portion of the total, grew by 14%. Despite these positive results, Evercore ISI adjusted its outlook on Five9, reducing the price target from $55 to $40, while maintaining an Outperform rating. The firm highlighted that Five9’s guidance for the second quarter met revenue expectations, and profitability exceeded them. Additionally, management has decided to uphold their full-year 2025 forecast without incorporating the $7.7 million Q1 beat into the second half, indicating lower expectations for that period. Five9 is also navigating international market challenges and longer sales cycles for larger deals. Nonetheless, the company remains focused on transformation initiatives, including investments in AI and go-to-market strategies, which are expected to drive future growth.
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