Deutsche Bank says this cloud software software stock is poised for big gains ahead
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Five9 is well-positioned to grow its market share in the software space as companies prioritize customer satisfaction, according to Deutsche Bank. The firm upgraded Five9, which provides cloud software services to customer contact centers, to buy from hold. It also raised its price target to $80 from $75, implying 20.4% upside from where shares closed Wednesday. “Simply put, we believe momentum from recent bookings strength (amidst a favorable backdrop for cloud contact center spend) is likely to re-accelerate revenue growth, with current valuation that is roughly half of year ago levels (and lags [small- and mid]-cap software peers relative to growth),” analyst Matt Niknam said. Niknam thinks there is a significant runway for incremental growth in the cloud contact center as a service market, which he said has a size of about 16 million total agent seats globally. Only about 20% of these seats have transitioned to the cloud — which suggests additional room for growth. “Given a focus on customer satisfaction as a top priority across businesses, and our checks indicating CX/contact center budgets continue to grow (despite macro pressure), we believe FIVN’s increasingly scaled platform and investments in AI/ automation-oriented offerings should enable it to continue taking outsized share in a relatively attractive [total addressable market] (with upmarket and international representing two key growth verticals),” said Niknam. Shares also trade at an attractive valuation — and off peak-levels — despite “enhanced visibility toward re-accelerating growth,” the analyst added. The stock is trading at 4 times its 2024 estimated enterprise-value-to-sales ratio — approximately half of its multiple last year, the analyst said. The stock is down 2.1% for the year. FIVN YTD mountain FIVN — CNBC’s Michael Bloom contributed to this report.
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