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On Friday, UBS analyst Taylor McGinnis adjusted the price target for Five9, Inc (NASDAQ:FIVN), a leading provider of cloud contact center software, from $55.00 to $35.00 while maintaining a Buy rating on the company’s shares. The revision reflects a more conservative valuation following Five9’s latest earnings report, which McGinnis described as a mixed outcome. According to InvestingPro analysis, Five9 appears undervalued at its current price of $25.41, with the stock having declined over 55% in the past year. The company maintains strong fundamentals with a healthy current ratio of 1.95, indicating solid short-term liquidity.
The company’s first-quarter revenue for fiscal year 2025 outperformed expectations, marking a 13% year-over-year increase. Additionally, Five9 reaffirmed its full-year revenue growth guidance of 10%. The adjusted EBITDA margin forecast also saw an improvement, with the analyst’s estimate being raised from 20% to 21%, which was perceived as either in line with or slightly better than market expectations. InvestingPro data shows the company maintains a robust gross profit margin of 54.37% and has achieved a trailing twelve-month revenue growth of 14.44%.
However, the report wasn’t without its concerns. McGinnis noted a slowdown in subscription revenue growth, which decelerated to 14% year-over-year from 19% in the fourth quarter of fiscal year 2024. The analyst also pointed out challenges such as extended sales cycles for larger deals and resistance to U.S. vendors in some international markets. These factors suggest potential emerging issues in the demand environment for Five9’s offerings.
Despite these concerns, the analyst believes that the risks to growth are already factored into the current stock price. With Five9’s shares trading at approximately 2 times the estimated calendar year 2025 enterprise value to sales (EV/S) and 14 times the estimated enterprise value to free cash flow (EV/FCF), the valuation seems to account for the possibility of growth falling into the teens. Moreover, the company’s commitment to margin expansion and free cash flow improvement is expected to provide some support for the stock price.
The new price target of $35 is based on a lower EV/S multiple, as McGinnis adjusts Five9’s valuation in light of the recent earnings report and market conditions. InvestingPro analysis reveals the company trades at a high EV/EBITDA multiple of 90.81x, though subscribers can access 8 additional key ProTips and a comprehensive Pro Research Report for deeper insights into Five9’s valuation and growth prospects.
In other recent news, Five9, Inc. reported its first quarter results for 2025, exceeding expectations with earnings per share (EPS) of $0.62 against a forecast of $0.49 and achieving revenue of $279.7 million, surpassing the anticipated $272.29 million. Following these results, Cantor Fitzgerald maintained its Overweight rating on Five9 with a price target of $36, citing strong performance in operating income and free cash flow. Meanwhile, Evercore ISI adjusted its price target for Five9 to $40 from $55, maintaining an Outperform rating, acknowledging the company’s robust first-quarter performance despite macroeconomic challenges. Five9 has also revised its revenue guidance upwards and increased its EPS forecast for the year, attributed to effective cost management and AI-driven growth in bookings. The company is targeting a medium-term model with 10-15% revenue growth and 25-30% profit margins by 2027. Five9’s management noted challenges such as delayed deals due to macroeconomic factors and geopolitical concerns affecting international clients, but emphasized ongoing strategic initiatives to enhance its competitive position and drive AI adoption.
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