2. Five9, Inc. (NASDAQ:FIVN)
Forward P/E Ratio: 12.17
Earnings Growth This Year: 10.70%
Analyst Upside Potential: 80.83%
Five9, Inc. (NASDAQ:FIVN) is a leading technology company that provides cloud-based software solutions for contact dealers. One of the key offerings of the company includes a Virtual Contact Center (VCC), which is aimed at enhancing customer service for businesses. The omnichannel platform allows businesses to seamlessly integrate voice, chat, social media, and much more into customer services.
The company has been focused on enhancing the consumer experience through integrating artificial intelligence in its platform. It stands as a differentiated leader in the said market and has incorporated features such as virtual agents that blend human interaction with AI capabilities to ensure personalized customer care for businesses.
Five9, Inc. (NASDAQ:FIVN) just surpassed the $1 billion mark for its FQ2 2024 revenue in annual run rate. Revenue growth was driven by a strong subscription rate, with the last 12-month subscription revenue growing 21% year-over-year and total subscriptions growing around 17% during the same time.
The growth prospects of the company look robust as it has developed various streams that generate high annual recurring revenue. It recently signed deals with higher education enrollment management, healthcare, and pharmacy benefits management companies.
Furthermore, due to its forward price-to-earnings ratio of 12.17 and earnings growth expected at 10.7% this year, it is one of the cheapest growth stocks to buy according to analysts.
Brown Capital Management Mid Company Fund stated the following regarding Five9, Inc. (NASDAQ:FIVN) in its Q2 2024 investor letter:
“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.”
