2. Five9, Inc. (NASDAQ:FIVN)
Year to Date Gain: -60.09%
Number of Hedge Fund Holders: 34
Five9, Inc. (NASDAQ:FIVN) has carved a niche as a provider of intelligent cloud software for contact centers. It offers a virtual contact center cloud platform that delivers applications that support customer service sales and marketing solutions.
The company has been facing stiff competition in cloud solutions, resulting in the stock sentiments taking a hit and tanking 60% year to date. The selloff has seen the company emerge as one of the worst-performing tech stocks in 2024.
The stock has been under pressure in the market on the company, facing a series of setbacks, including a reduction in revenue guidance that has triggered concerns about underlying growth. The company has also been forced to carry out a series of layoffs to strengthen its profit margins as it faces competitive pressures.
In 2024, investment firm Anson Funds Management amassed a significant stake in the call center software company and began an activist campaign. The investment firm is urging the company to consider a potential sale of the entire business as one of the ways of unlocking hidden value after years of underperformance.
The sales push came after Five9, Inc. (NASDAQ:FIVN) pushed back on a deal to be acquired by Zoom Video Communications, the maker of virtual meeting software. Nevertheless, it has since acquired Acqueon, a firm specializing in proactive outbound Omni channel customer engagement, and it is looking to expand its artificial intelligence offerings to bolster its growth metrics.
The push to acquire Acqueon also aligns with Five9’s plans to manage its expenses and improve profitability as it expands its footprint in India to pursue new growth opportunities and improve gross margins.
By the end of the second quarter of 2024, the number of hedge funds with positions in Five9, Inc. (NASDAQ:FIVN) had decreased to 34, down from 38 in the previous quarter. Among these hedge funds, Alyeska Investment Group emerged as the largest shareholder, holding a significant position valued at $94.22 million.
In its Q2 2023 investor letter, Brown Capital Management Mid Company Fund provided the following insight regarding Five9, Inc. (NASDAQ:FIVN):
“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.”
