Shares of specialized cloud platforms provider Nice (NICE -4.90%) were down 8% at noon ET Thursday, according to data provided by S&P Global Market Intelligence.
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Nice reported first-quarter earnings that saw sales and operating cash flow rise by 6% and 12%, beating analysts' expectations on the top and bottom lines.
The company also offered up guidance that matched analysts' expectations, but the market's reaction seems to say they were hoping management was sandbagging its outlook.
Nice's perfectly fine results dismay the market
Nice is home to three cloud platforms powered by artificial intelligence (AI) and specializing in customer experience (particularly contact center services), financial crime and compliance, and public safety and justice.
Multiple industry experts recognize Nice as a leader within each specialty, and the company counts 85 of the Fortune 100 as customers.
While revenue rose "only" 6%, Nice's cloud sales (which equal three-quarters of its total revenue) grew by 12% during Q1. Said another way, Nice's smaller and less critical products and services sales continued shrinking, but its core cloud business remained strong.
However, this was the first time in three years that the company's cloud sales didn't grow quarter over quarter, which might explain the market's harsh reaction.
Most importantly, though, Nice saw revenue related to AI and self-service rise 39% in Q1. In my opinion, this is the most important takeaway from the earnings call, as it shows Nice's ability to incorporate AI into its already market-leading cloud platforms.
Trading at just 18 times free cash flow -- even after accounting for stock-based compensation -- Nice has a new $500 million stock buyback plan that could help increase shareholder value.
This balance between capital allocation and Nice's leadership position in burgeoning niches makes the company an intriguing and potentially discounted growth stock.
