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Why LivePerson Jumped 10.8% in January

By Todd Campbell - Feb 5, 2020 at 11:26AM

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Investors are increasingly optimistic conversational commerce will disrupt how consumers connect to businesses.

What happened

After delivering sequential revenue growth through the first nine months of 2019, investors are increasingly confident LivePerson's (LPSN 4.24%) approach to conversational commerce will help drive shares higher in 2020. While the company didn't report any significant news in January, Wall Street analysts did boost their price targets last month because of growing optimism. As a result, the company's shares jumped 10.8% in January, according to S&P Global Market Intelligence.

So what

LivePerson markets conversational commerce solutions that connect brands and consumers via social media and messaging platforms, including WhatsApp and Apple Business Chat. Using sophisticated artificial intelligence tools, LivePerson's LiveEngage software-as-a-service solution offers brands a more flexible customer service and sales option than traditional phone calls.

A man uses a cup to listen through a wall.

Image source: Getty Images.

Connecting brands and consumers more efficiently is driving LivePerson's sales significantly higher. Over 18,000 businesses use its solution, and more clients are signing up. In the third quarter of 2019, the number of total deals inked with clients increased 47% year-over-year, driven by 33% growth in new customers and 64% growth from existing customers. Its average deal was 38% bigger than the year prior, and average revenue per user increased over 20% to a record $330,000 in the quarter. As a result, third-quarter revenue increased 17.1% year-over-year to  $75.2 million, an acceleration from the 15% and 14% revenue growth delivered in Q2 and Q1, respectively. 

Because of improving revenue last year and the potential for ongoing sales growth to support shares this year, Wall Street analysts increased their share price targets last month. On Jan. 10, Mizuho Securities initiated coverage at a buy with a price target of $45. Oppenheimer lifted its price target to $50 from $45 on Jan. 17. KeyBanc increased its target to $48 from $45 on Jan. 23.

Now what

Consumers prefer connecting to businesses via chat and social media, rather than over the phone. That trend could accelerate as companies make it easier to message businesses. For instance, Apple rolled out Business Chat Suggest last year, a feature that automatically suggests a messaging option to consumers calling a brand's phone number. Conversational commerce can drive sales and satisfaction higher and reduce call center expenses -- and that could mean LivePerson's opportunity is big. Over 270 billion customer service phone calls are made annually, costing businesses an estimated $1.5 trillion. For that reason, LivePerson pegs its addressable market at $60 billion. Investors will get more insight into the company's progress toward capturing its market opportunity when it reports fourth-quarter financials on Feb. 13.


Todd Campbell owns shares of Apple. His clients may have positions in the companies mentioned. The Motley Fool owns shares of and recommends Apple. The Motley Fool recommends LivePerson. The Motley Fool has a disclosure policy.

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LivePerson, Inc. Stock Quote
LivePerson, Inc.
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