Five9 Inc: Cloud Stock up 130% Since March Still Has 40% Upside

Five9 Inc Stock Soars on Growing Demand from COVID-19

A provider of cloud-based call-center software, Five9 Inc (NASDAQ:FIVN) has been on an excellent growth trajectory for years.

Since the start of 2016, Five9 stock has soared 1,316%. You can credit that growth to a long history of announcing record revenue growth and strong outlooks.

Then came 2020.

The breakout of the coronavirus pandemic at the start of the year forced people around the world to quarantine or self-isolate and work from home. That includes call center employees.

All of this has helped bring additional attention to Five9 and its cloud-based software.

In 2020 alone, Five9 Inc stock has climbed 86.2%; FIVN stock is also up 130% since bottoming in March.

Despite these big gains, Five9 still has lots of room to run. The big question is…how far can it go?

Analysts on Wall Street, who tend to be conservative in their outlook, have a 12-month price forecast for FIVN stock of $157.00, which represents a 28% increase from current levels.

This seems a little conservative.

Back in August 2019, Five9 stock was trading for around $68.20. We provided a 12-month forecast of $87.00, which represented upside of approximately 40%. Wall Street was forecasting a 12-month target of $70.00. One year later, and Five9 entered August 2020 trading at $121.82.

When you look at Five9’s growth trajectory, consecutive quarters of record revenue growth, and the global climate, it seems more appropriate to provide a 12-month share price forecast of $185.00; this represents a 40% increase from current levels.

Chart courtesy of StockCharts.com

FIVN Stock Overview

Five9 is a leading provider of cloud software to contact centers, with more than 2,000 global customers. (Source: “Q2 2020 Investor Presentation,” Five9 Inc, last accessed September 24, 2020.)

The company’s proprietary infrastructure technology helps its clients increase productivity, lower costs, and create a better customer experience.

The company’s “Virtual Contact Center” cloud platform and artificial intelligence (AI) technology allow its clients to manage customer interactions across numerous channels, including voice, chat, email, web, social media, and mobile.

Some of Five9 Inc’s 2,000+ global customers include Anthem Inc (NYSE:ANTM), Carfax, Citrix Systems, Inc. (NASDAQ:CTXS), Expedia Group Inc (NASDAQ:EXPE), Fitbit Inc (NYSE:FIT), Lululemon Athletica Inc (NASDAQ:LULU), and Sotheby’s International Realty, Inc.

Another Quarter of Record Results

On August 3, Five9 announced that revenue for the second quarter ended June 30 increased 29% year-over-year to a record $99.8 million. (Source: “Five9 Reports Second Quarter Revenue Growth of 29% to  Record $99.8 Million,” Five9 Inc, August 3, 2020.)

Five9 reported a second-quarter net loss of $16.1 million, or a loss of $0.25 per share, compared to a net loss of $1.9 million, or a loss of $0.03 per share in the same period last year.

Adjusted net income was $14.1 million, or $0.21 per share, a 14.6% increase over second-quarter 2019 adjusted net income of $12.3 million, or $0.20 per share. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $18.3 million, or 18.3% of revenue, compared to $14.4 million, or 18.6% of revenue, in the second quarter of 2019.

Second-quarter 2020 operating cash flow was $14.8 million, compared to operating cash flow of $6.8 million for the second quarter of 2019. This represents the company’s 18th consecutive quarter of positive cash flow.

“We delivered exceptionally strong second quarter results,” said Rowan Trollope, CEO. “We believe the on-premises to cloud and digital transformation trends driving our massive market opportunity are likely to accelerate as work-from-home trends continue and retail sales personnel are increasingly displaced by contact center agents.”

Five9 Inc Raises Guidance

For the third quarter of fiscal 2020, Five9 expects to report:

• Revenue in the range of $100.5 to $101.5 million
• Net loss in the range of $(18.9) to $(17.9) million, or $(0.29) to $(0.28) per basic share
• Adjusted net income in the range of $11.6 to $12.6 million, or $0.17 to $0.18 per diluted share

For fiscal 2020, Five9 now expects to report:

• Revenue in the range of $399.0 to $401.0 million, higher than the prior guidance range of $380.5 to $383.5 million provided on May 4, 2020
• Net loss in the range of $(56.4) to $(54.4) million, or $(0.88) to $(0.85) per basic share, lower than the prior guidance range of $(45.4) to $(42.4) million, or $(0.72) to $(0.67) per basic share
• Adjusted net income in the range of $52.7 to $54.7 million, or $0.77 to $0.80 per diluted share, higher than the prior guidance range of $48.3 to $51.3 million, or $0.72 to $0.76 per diluted share

Analyst Take

It’s not hard to find a stock that’s done well during the coronavirus pandemic. It’s tough though to find a bullish tech stock that will continue to do well after things return to normal.

Five9 Inc is one of those stocks.

Since the start of 2018, it has reported record revenue growth every single quarter. In the most recent quarter, it reported better-than-expected results and raised its guidance. It was a great stock before COVID-19 and will continue to be an excellent stock after.