11) Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Holders: 29
Average Upside Potential: 32.6%
Five9, Inc. (NASDAQ:FIVN) uses AI to revolutionize customer service operations and improve agent productivity. It integrates AI across its platform to automate processes, offers intelligent insights, and provides personalized customer experiences. Five9, Inc. (NASDAQ:FIVN) has been investing in AI solutions, which is expected to be a significant opportunity if adoption increases. The company’s AI offerings are the strong contenders in the market. Its focus on AI aligns with broader industry trends that focus more on intelligent and automated customer service solutions.
As businesses focus on automation and enhancing their customer service operations, AI-powered contact center solutions are expected to be more valuable. Five9, Inc. (NASDAQ:FIVN)’s strong AI offerings place it well to capitalize on this growing trend. If the company can establish itself as a leader in AI-powered CCaaS solutions, it can fuel significant growth and gain a competitive edge. Moreover, AI solutions often command higher price points that can result in increased customer stickiness, potentially improving revenue growth and customer retention rates.
Brown Capital Management, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“Five9, Inc. (NASDAQ:FIVN) is a leader in cloud-based contact-center software, which serves as the routing engine to connect callers to agents. With the growth of e-commerce, consumers are making fewer in-person visits to stores but contacting companies more frequently, driving the need for world-class contact-center software solutions like Five9’s. It has been a tough couple of years for Five9’s stock and this quarter provided no relief. Competitive concerns, questions about AI’s long-term impact on the business and deteriorating macroeconomic conditions have all cast clouds over the company’s stock. Five9’s consumer segment, one of its largest divisions, has really struggled of late as clients hire fewer call-center agents, pressuring Five9’s seat-based revenue model. Total revenue growth decelerated to 13% year-over-year in the most recent quarter, down from 28% and 17% in 2022 and 2023, respectively. Moreover, management guided to 16% for the full year 2024, which some consider optimistic given the weak start to the year. These worsening sales trends further weighed on shares during the quarter.
Looking through the current industry doldrums, we see a bright future for Five9. The company inked its largest deal ever during the quarter, which will generate more than $50 million in annual revenue once fully rolled out. We believe this is an important signal of Five9’s long-term potential. The company is attacking a $60 billion market opportunity, is winning new business at industry-leading rates and is gaining share from legacy incumbents stuck with antiquated technology. We continue to assess the potential threat of AI, but so far it has provided an uplift to company results. The company’s AI product is very popular with large enterprises as it assists agents with customer interactions and can sometimes be used to fully automate interactions. Far from shrinking the number of industry seats, as some fear, management said revenue per seat doubles when customers adopt their AI applications. We expect sales growth to pick up markedly in the coming years, which should result in much stronger stock performance.”