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On Friday, NICE Systems Ltd (NASDAQ:NICE) shares declined following the company’s release of its financial results, which included cloud revenue that fell short of expectations. The stock fell nearly 13% over the past week, now trading at $153.59. This prompted Rosenblatt analysts to revise their outlook on the company’s stock. The firm’s price target was reduced to $200 from a previous target of $225, while the Buy rating remained unchanged. According to InvestingPro analysis, NICE is currently trading near its 52-week low, suggesting a potential opportunity for value investors.
The technology company reported earnings that were generally in line with market projections, but the figures revealed that cloud revenue did not meet the anticipated growth. Despite the recent challenges, NICE has maintained strong financial performance with a 13.52% revenue growth over the last twelve months. Additionally, the forecast for fiscal year 2025 suggested a more modest expansion than analysts had predicted, with revenue growth projected at 7% versus the consensus of 10%, and cloud revenue growth at 12% compared to the expected 17%. InvestingPro subscribers have access to 8 additional key insights about NICE’s growth prospects and financial health.
The more cautious revenue guidance provided by NICE Systems may be attributed to the conservative approach of the new CEO and the extended timeline required to deploy large complex deals. Despite these challenges, the firm has experienced notable success, particularly with its AI-driven CXone Mpower deals, which are large enterprise contracts with an annual recurring revenue exceeding $1 million. According to Rosenblatt, these deals comprised 97% of the company’s significant transactions.
The revised price target of $200 is based on a multiple of 4 times the enterprise value to the projected CY25 sales, a slight decrease from the prior multiple of 4.4 times. This valuation still represents a modest premium over the average of 3.5 times for the peer group within the CCaaS/UCaaS sector. The premium is considered warranted due to NICE’s strong competitive position, high profit margins, and its ability to generate free cash flow.
The adjustments in the price target reflect the current market conditions and the company’s performance, as well as Rosenblatt’s continued confidence in NICE’s market position and financial health. InvestingPro data supports this view, with the company receiving a "GREAT" overall financial health score and trading at an attractive P/E ratio of 22.59. According to InvestingPro’s Fair Value analysis, NICE appears significantly undervalued at current levels. Discover comprehensive insights and access the detailed Pro Research Report, available exclusively to InvestingPro subscribers, covering this and 1,400+ other top US stocks.
In other recent news, NICE Systems Ltd reported its fourth-quarter 2024 financial results, showcasing a non-GAAP earnings per share (EPS) of $3.02, slightly above the consensus estimate of $2.95. The company also exceeded revenue expectations, reporting $722 million in non-GAAP revenue, marking a 16% year-over-year increase. Despite these positive figures, NICE Systems provided a conservative outlook for 2025, projecting a 12% growth in cloud revenue, which fell short of the 17% anticipated by analysts. In response to these developments, several analyst firms adjusted their price targets for the company. Cantor Fitzgerald lowered its target to $161, maintaining a Neutral rating, while Mizuho (NYSE:MFG) reduced its target to $185 but continued to recommend the stock as Outperform. Jefferies also revised its price target downward to $173, citing concerns about the company’s future performance amidst a competitive tech landscape. Meanwhile, JMP maintained its $300 price target, reflecting confidence in NICE Systems’ financial health and growth trajectory. These recent developments highlight the varying analyst perspectives on NICE Systems’ performance and future outlook.
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