Five9’s price target cut at Piper Sandler as analysts mull strategic options for company

Piper Sandler kept its Overweight rating on Five9 (NASDAQ:FIVN) but reduced the price target to $35 from $47.

Last month, Five9 said it was planning to reduce its global workforce by 7% as part of its larger plan to increase shareholder value.

With the company’s stock down about 60% year-to-date, estimates and guidance being cut as growth decelerates, margins underperforming peers, and other missed opportunities, the analysts’ discussions point to investors looking for greater change at Five9, said a team of analysts led by James Fish.

The analysts added that while the company’s management has started a cost-savings program, people question if it is enough.

However, Fish and his team noted that Five9 is moving upmarket and should see an Al benefit as the shift towards automation forces Contact Center as a Service, or CCaaS conversions.

The analysts pointed five potential options for Five9 ahead, with options two and five implicitly creating more shareholder value.

The first option is no change: The analysts said the highest probability scenario in near term, where they see estimates as reset more than enough and a likely 10% year-over-year guidance-starting point for 2025 based on their analyses. Positively, the recent cost-savings program should create EBIT/FCF (free cash flow) upside which could generate another $10 per share if well-executed, they added.

Secondly — one of the two options creating more shareholder value as per the analysts — is further activism forces. Relative to similar growth and competitive peers, Five9 is not generating enough margin. An activist could push for more cost cuts to get to over 25% operating profit margin, or OPM, in 2025 and beyond.

The third option is merger. The analysts said Five9 could merge with several public peers, with major partner Verint (VRNT) an obvious candidate. Running through a hypothetical pro-forma analysis, and given the analysts’ assumptions that include $100M in 2026 cost-synergies, this would lead to a combined entity worth over $6B with a greater combined platform.

The fourth option is private equity. As per the analysts, the second most logical scenario would be private equity in which there could be multiple ‘flavors’, including transitioning the business in several ways on its own or being combined with another private equity-backed asset across customer relationship management or CRM.

The fifth option, which as per the analysts also creates more shareholder value, is strategic takeout. Fish and his team said that the CCaaS, space offers attractive strategic benefits as several players, with Cisco (CSCO), ServiceNow (NOW), Salesforce (CRM) Zoom, and Twilio (TWLO) as potential strategic candidate. Cisco could be the best fit, according to the analysts. Strategic takeouts tend to be higher premiums paid relative to private equity, they added.