Chicago, IL – December 16, 2024 – Today Zacks Investment Ideas presents the highlights of Five9, Inc. FIVN and Zoom ZM.
Five9, Inc. Stock prices have fallen 80% from summer 2021 highs as rising interest rates caused Wall Street to dump stocks at huge premiums to future earnings. Five9 shareholders also rejected Zoom’s attempt to buy the company in September 2021.
Five9 stock remained on a downward trajectory until this fall. The cloud contact center software provider is up 40% since early November, thanks to a solid beat-and-raise quarter.
Five9’s AI-enhanced features are driving results, and its recent upward earnings revisions earn the company a Zacks Rank #1 (Strong Buy).
FIVN has crushed the Zacks Tech sector over the past decade, up 845% versus 340%, even though it is trading 80% below its all-time high. Therefore, investors looking for tech stocks with big upside in 2025 might want to buy Five9 stock.
Five9 has been at the forefront of cloud software solutions for contact centers. Five9’s easy-to-use applications help customers improve customer interactions across voice, chat, email, web, social media and mobile. Five9’s goal is to help transform contact centers for the modern world, where customers expect a streamlined, customized experience 24 hours a day on every possible communications platform.
Five9 has adapted to the AI arms race and rolled out its Intelligent CX Platform. Five9’s AI-enhanced offering enables its customers to “deliver AI-driven, hyper-personalized, seamless experiences at every stage of the customer journey.”
Five9 aims to empower customer service agents to take care of everything the customer needs as efficiently as possible, while becoming more proactive and personalized.
FIVN increased its subscription revenue by 20% in the third quarter, while total revenue increased by 15%. Five9 posted an adjusted EBITDA margin of 20%, helping the company generate $41 million in operating cash flow.
Five9 raised its outlook when it reported on November 7, with positive EPS revisions earning it a Zacks Rank #1 (Strong Buy). “We are energized by the momentum we are seeing with our AI products and believe the future market opportunity is stronger than ever,” CEO Mike Burkland said in prepared remarks.
Five9 is expected to grow its adjusted earnings by 15% in 2024 and 8% next year. FIVN has exceeded our bottom-line estimates by an average of 22% over the last four quarters. The customer service technology company is expected to grow its revenue by 13% and 10.5% respectively to $1.14 billion in 2025 – up from $435 million in 2020.
FIVN stock is up 845% over the past decade, blowing away the Zacks Tech sector’s 340%. Yet the stock is down 35% over the past five years. Five9’s stock is trading 80% below its August 2021 peak, which it reached shortly after Zoom announced it would acquire FIVN in an all-stock deal, valuing Five9 at $14.7 billion.
Fast forward a few months to September 2021, and the companies terminated the deal by mutual agreement after it failed to receive the required number of votes from Five9 shareholders. Five9’s current market cap is $3.2 billion, while its stock is down 45% in 2024.
FIVN is showing signs of life and is up 50% in the last three months and 35% since its Q3 release in early November.
Five9 is trading 19% below its average Zacks Price Target and is looking to recapture its 50-week moving average.
FIVN trades at 2.9x trailing-12-month sales, which represents a 55% discount to Tech and 50% value to the 10-year median. Five9’s future earnings figures remain sky-high and are a large part of the reason for the slump and massive underperformance of recent years.
If Five9 can slowly improve its bottom line through its AI efforts, it could be a winner in the long run.
Wall Street could start nibbling on the stocks, even at their valuation levels. Additionally, 12 of Zacks’ 19 broker recommendations for the cloud contact center software stock are “Strong Buys,” along with two “Buys” and zero Sells.
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