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On Monday, Piper Sandler adjusted its outlook on Five9, Inc (NASDAQ:FIVN), a leading provider of cloud contact center solutions. The firm's analyst, maintaining an Overweight rating on the stock, reduced the price target from $53.00 to $36.00. The adjustment reflects a recalibration of Five9's future financial expectations, with a modest top-line estimate reduction and a more significant free cash flow (FCF) projection decrease. According to InvestingPro data, the stock has experienced significant pressure, falling over 61% in the past year, with current trading levels near its 52-week low of $22.09.
The analyst from Piper Sandler expressed continued preference for Five9 and Twilio (NYSE:TWLO) as top picks within the sector, despite acknowledging heightened risk-reward scenarios, especially for established players with net-cash positions. The revision in Five9's estimates includes a slight 0.2% decrease for 2025 and a more pronounced 3% reduction for 2026. The anticipated FCF for the company is also expected to drop by 5-8%. InvestingPro analysis indicates the company maintains strong liquidity with a current ratio of 1.95, while operating with a moderate debt level. Eight analysts have recently revised their earnings estimates upward for the upcoming period, suggesting potential resilience despite current challenges.
This reassessment of Five9's financial projections comes after the company announced a 4% reduction in force (RiF), which has been factored into the new estimates. The revised price target of $36.00 is based on a 15 times enterprise value to calendar year 2026 estimated FCF of $192 million. This valuation includes consideration of the company's net debt, which stands at $147 million, and a share count of 77 million.
The lowered price target also signifies a shift in the investment firm's perspective on Five9's stock, now viewing it through a lens that balances value with growth at a reasonable price (GARP). This change is due to the expectation that Five9's out-year growth will be less than 10%. Despite these adjustments, Piper Sandler's Overweight rating indicates a belief in the stock's potential to outperform the broader market or its sector average over a specified time horizon.
In other recent news, Five9, Inc. has announced that its first-quarter revenue and earnings per share are expected to meet or exceed guidance, as reported by Piper Sandler. This positive outlook comes amid a strategic workforce reduction, affecting approximately 4% of its workforce, which is expected to result in annual savings of $25 million to $30 million. Piper Sandler continues to maintain an Overweight rating on Five9, citing the company's potential for growth despite economic challenges. Similarly, Cantor Fitzgerald reaffirmed its Overweight rating with a $36.00 price target, noting the company's valuation as attractive with a significant upside potential. Needham also maintained a Buy rating and a $52.00 price target, expressing confidence in Five9's operational execution and revenue prospects.
In other developments, Five9 announced a reshuffling of its board of directors, with Jonathan Mariner being reappointed as a Class II director. This change aligns with Five9's efforts to streamline its governance structure. Meanwhile, Udemy Inc (NASDAQ:UDMY). faced a downgrade from Truist Securities, which revised its stock rating to Hold and lowered the price target to $7.00. Truist cited concerns over Udemy's business mix and discretionary spending in online learning, projecting a conservative revenue growth of 5% by 2026. Despite these challenges, Udemy's shares are noted to be undervalued, with Truist suggesting alternative investment opportunities with potentially lower risks.
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