Record-Breaking Revenue Growth For Five9
Five9 (NASDAQ:FIVN) delivered a knockout earnings report and investors responded sending shares up nearly 8 % on Friday. For the first quarter of 2021, revenue increased 45% over the first quarter of 2020, hitting $137.9 million. That represents a new record high for the company, as well as a big gain over this time last year. In 2020's first quarter, the company brought in $95.1 million. It's also a revenue beat, reports note, as consensus estimates were looking for $122.5 million.
The company's net income was also up, as it brought in $0.23 per share with $16.1 million total income. Analysts were looking for $0.13 earnings, reports noted, making for a second win.
Five9 then proceeded to take the trifecta by ramping up its full-year guidance. The company now looks to bring in between $548.5 million and $551.5 million, which not only represents a boost of around $30 million over the company's earlier figures, but also a minimum of $28 million over consensus figures of $520.6 million. EPS guidance was likewise hiked over the original $0.77 to a new $0.91.
What do Financial Analysts Think about FIVN Stock?
Anyone looking for financial analysts to provide motivation to buy in on Five9 will be deeply gratified. The consensus is not only a “buy” right now, but it's been a “buy” for the last two years.
It's not just a “buy”, but a “buy” by a wide margin. While the specific numbers have changed over time, the ratio of “buy” to “hold” averaged around four to one through 2020. For 2021, that's slipped to just over three to one, but that's still an overwhelming “buy” rating. The company had one “sell” rating for most of the last year, though it vanished in April, only to be replaced in May.
Price target action has been even more amazing; the range is fairly broad right now, with a high of $220 and a low of $120, but an average of $192.59. On April 30, five analysts came out with positions on Five9, and four out of five raised their price targets. Even Roth Capital, who currently maintains a “neutral” rating on the company, boosted the price target from $135 to $160. Meanwhile, the other four analysts all have price targets of at least $200 or higher; only Needham & Company maintained a price target of $200, while the remaining three raised targets.
Overvalued, or Just Hitting its Stride?
There's a lot to recommend Five9 here, but looking at its charts today would make one think the bottom is falling out. The gains realized on Friday have been given back, and the company is under significant downward pressure, likely connected to profit-taking after Friday's gains.
Some believe that Five9 stock is currently overvalued, pointing to its market cap and its troubling cash-to-debt ratio of 0.92. However, it's also worth noting that revenues are trending upward and the company is securing its place as a major name in AI-driven automation.
That's the biggest point in Five9's favor right now: the company's focus is automating call centers. Call centers across a range of functions, too; Five9's expansion in automating healthcare call centers is likely seen as a godsend by its customers, especially owing to its range of tools. Five9 can offer video conferencing, appointment reminder tools, and even self-service options all while maintaining HIPAA requirements. Five9 doesn't stop at healthcare, either; many of these same tools are finding their way into retail operations, financial services, collections, and more.
Granted, as economies reopen and offices with them, the need for cloud-based call center tools will not be as pressing as it was last year. That could slow Five9's future growth. However, with employees taking an active interest in remote work even after vaccinations take place, there will still be interest. Going from “vital necessity” to “useful convenience feature” will certainly take some business away from the future, but Five9 has already established a beachhead it can readily defend. It also serves as a backup plan should further need to arise; we've already seen governments willing to shut down economies over disease, and if another disease comes into play, having the tools in place to withstand such measures makes for a golden sales pitch.
The company is raising its guidance. Analysts are on board by substantial margins. While the share price may be slipping a bit today, that could just be a buying opportunity in the making. Getting in on the future of call center technology could be the smartest move you'll make today.
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