Five9 Stock: Labor Automation Opens New Growth Opportunities

Cloud software provider Five9 (NASDAQ: FIVN) is benefiting from the strong demand environment stemming from the rapid transformations across industries to the cloud.

However, the FIVN stock had quite a volatile 2021, with the price reaching $209.7 at its peak on August 4, and dropping to $128.25 at its lowest on December 14. Overall, FIVN has stock declined 22.4% in the past year.

To understand the business better, Needham analyst Scott Berg and his associates held a fireside chat with top Five9 executives, who discussed the strengths of the business.

Notably, Five9 has moved past selling only to traditional IT and sells its CCaaS (Contact Center-as-a-Service) solutions to line of business (LOB) buyers. This buyer cohort is getting increasingly involved in the purchase decisions of a business, making them a crucial part of sales.

Five9 is also actively working with partners to address the rising need for reducing labor costs. The pandemic led to widespread labor shortages which gave rise to the need to automate various job roles in order to reduce the dependence on human labor. Five9’s IVA technology automates simple transactions, which is why more and more enterprises are turning to Five9 for assistance.

“We believe FIVN’s automation capabilities provide a significant opportunity for TAM expansion and position the company to capture labor spend that is shifting to technology. This trend is particularly present upmarket as the company noted it is seeing enterprises increasingly adopting a larger portion of the portfolio upfront as automation becomes a bigger strategic priority,” noted Berg in his research report.

Additionally, the company is also focused on increasing value for its partners and system integrators. A widening customer and partner base is contributing meaningfully to growth. On the international business front, the company is actively seeking to build operations in the U.K. and Germany. This is expected to open many opportunity doors in the future since about half of the world’s contact center agents are based outside the U.S.

Currently, international revenues make up about 9% of total revenues. The way things are going, Berg believes this proportion will eventually reach the mid-teens over the coming years.

The analyst reiterated a Buy rating on the stock with a price target of $200.

The rest of Wall Street is also optimistic about the FIVN stock, with a Strong Buy rating based on 12 Buys and one Hold. The average FIVN price target is $199.08.

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