5. NICE (NASDAQ:NICE)
Upside Potential: 45.90%
Market Cap: $11.47 Billion
NICE (NASDAQ:NICE) is a global enterprise software company headquartered in Israel. The company specializes in cloud-based analytics, artificial intelligence (AI), and customer engagement solutions. The company focuses on two main areas: Customer Engagement and Financial Crime and Compliance. In the Customer Engagement segment, NNICE (NASDAQ:NICE) offers a wide range of products that enhance customer experience through advanced analytics, AI, and automation, serving industries such as telecommunications, finance, healthcare, and retail. In the Financial Crime and Compliance sector, NICE (NASDAQ:NICE) provides tools and software that help organizations detect and prevent financial crimes, such as fraud and money laundering. NICE (NASDAQ:NICE) is recognized as a market leader in both areas and has a strong global presence, serving customers in over 150 countries.
NICE’s (NASDAQ:NICE) has a robust financial position and has consistently grown its revenue and expanded its gross margins, particularly in its cloud segment, which accounts for 71% of total revenue. In Q1, NICE’s (NASDAQ:NICE) revenue increased 15% year-on-year to $659.3 million. Cloud revenue saw an impressive growth of 27%, reaching $468.4 million. Operating income for the quarter was $199.8 million, marking a 22% increase from the previous year, while the operating margin improved to 30.3% from 28.6% last year. For Q2, NICE (NASDAQ:NICE) anticipates total revenues to range between $657 million and $667 million, which would represent a 14% year-over-year growth at the midpoint. For the full year 2024, NICE forecasts total revenues between $2.71 to $2.73 bllion, reflecting a 15% growth at the midpoint compared to 2023. Additionally, the company has raised its full-year EPS guidance to a range of $10.53 to $10.73, projecting a 21% year-over-year growth at the midpoint, however, the company does not currently pay a dividend.
NICE’s (NASDAQ:NICE) CXone platform is emerging as a powerhouse in the customer engagement industry. CXone offers a comprehensive suite of AI-driven solutions that enhance employee performance and deliver personalized customer experiences. CXone has ability to manage 100 million customer interactions per month, its scale, and data advantage are a significant barrier to entry for competitors.
Vulcan Value Partners stated the following regarding NICE Ltd. (NASDAQ:NICE) in its Q2 2024 investor letter:
“There was one material detractor: NICE Ltd. (NASDAQ:NICE). NICE is a global enterprise software company that provides mission-critical contact center software. NICE was a material contributor last quarter. As we said last quarter, the company continues to perform well, and fundamentals are strong. Cloud revenue has grown in line with our expectations. We believe that generative AI will continue to drive cloud adoption and that AI is an opportunity rather than a threat to NICE’s business. As the leading platform in the space, the company has many competitive advantages that position them well to win. Cloud penetration is in the low 20% range today and AI will likely accelerate cloud adoption, which should benefit NICE. We believe that this growth will more than offset any seat count attrition due to automation. Furthermore, data and customer examples show AI is driving higher levels of revenue per customer and that AI specific product adoption is increasing rapidly. We followed our discipline and added to our position during the quarter.”
Parnassus Value Equity Fund stated the following regarding NICE Ltd. (NASDAQ:NICE) in its first quarter 2024 investor letter:
“During the quarter, we added new positions in Pfizer, NICE Ltd. (NASDAQ:NICE) and Charter Communications. NICE is a leading cloud contact center software company. We believe its customers will increasingly adopt AI-enabled customer experience software, driving double-digit revenue growth. NICE has a strong moat with leadership in contact center software. Its stock was significantly down from its 2021 peak due to softening demand post-pandemic. However, the stock has sizable upside potential as enterprises continue to embrace AI and cloud-based solutions.”
NICE (NASDAQ:NICE) is poised for continued success as it leverages its leadership in AI and cloud technologies to dominate the CX and financial crime compliance markets. With an estimated 80% of the CX market yet to migrate to the cloud, the company’s growth trajectory makes it a compelling investment opportunity for those seeking exposure to the future of customer engagement and compliance solutions.
NICE (NASDAQ:NICE) is trading 16.28 times its earnings, which is a 30% discount compared to the sector median of 23.47. The company’s earnings are expected to grow by 20% this year. In the second quarter, NICE’s (NASDAQ:NICE) stock was held by 29 hedge funds with stakes worth $742.72 million. RGM Capital is the largest shareholder in the company with a stake worth $180.75 million as of June 30. The stock is trading at $181.58 as of August 28. Industry analysts have a consensus on the stock’s Buy rating, setting an average share price target at $264.93, which represents a 45.90% upside potential from its current level.
