Please ensure Javascript is enabled for purposes of website accessibility

Five9 Is Firing on All Cylinders

By Daniel Sparks - May 21, 2021 at 7:30AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The cloud-based contact center company is winning customers and impressing analysts.

Amid Wall Street's recent sell-off of growth stocks, Five9 (FIVN -0.24%) has continued to impress, and its shares have been more resilient than many of its fast-growing technology peers. Indeed, the cloud-based contact center specialist is one of the rare growth stocks that has recently had analysts scrambling to increase their 12-month price targets.

Analysts from Northland and Piper Sandler recently boosted their price targets for Five9 stock to $215 and $220 from $200 and $212, respectively. Those updates came after the company posted first-quarter results late last month that were far ahead of expectations.

A digital-looking cloud

Image source: Getty Images.

Accelerating growth

It would be difficult to overstate Five9's momentum. The company's revenue rose 33% in 2020 -- a significant acceleration from its 27% growth in 2019. Further, its quarterly year-over-year revenue growth rates have accelerated for the past four quarters.

Its most recent quarter was particularly impressive, with the company posting blistering year-over-year revenue growth of 45%.

"Our first quarter results exceeded expectations across the board," said CEO Rowan Trollope in Five9's earnings release. "We delivered record first quarter revenue of $138 million, accelerating 45% year-over-year, an all-time high."

Management said growth during the period was driven by the closing of more large enterprise deals and increased traction with its existing customers.

Five9's progress with large customers has been a major catalyst for its growth. Management has said the company's expansion rate among customers that generate more than $1 million of annual recurring revenue for it is meaningfully higher than the rate among the rest of its customers.

A step-change in management's full-year outlook

Another reason analysts and investors may be impressed with Five9 is the degree to which it boosted its full-year outlook. In its first-quarter update, management increased its revenue guidance for the full year to a range of $520 million to $550 million. At the midpoint, that implies 26% year-over-year growth -- up from the 20% growth the company was previously guiding for. And notably, management's guidance has historically proven to be conservative.

Trollope said on the Q1 earnings call that he believes there are three fundamental catalysts driving Five9's growth -- and none of them seem to be letting up. The first is market momentum, driven by organizations' ongoing digital transformations and their increasing adoption of cloud services. The second is the company's rapid product innovation. And the third is its aggressive investment in sales execution.

Given Five9's recent strong execution and management's optimism about the opportunities ahead, this company still appears to be early in its growth story.

Daniel Sparks has no position in any of the stocks mentioned. His clients may own shares of the companies mentioned. The Motley Fool owns shares of and recommends Five9. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Five9, Inc. Stock Quote
Five9, Inc.
FIVN
$116.89 (-0.24%) $0.28
Piper Sandler Companies Stock Quote
Piper Sandler Companies
PIPR
$131.22 (-0.50%) $0.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
400%
 
S&P 500 Returns
128%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/15/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.