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Why Five9 Inc. Stock Popped Today

By Steve Symington - May 18, 2016 at 3:15PM

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The cloud-based call center software company rose despite no company-specific news. Here's what investors need to know.

Image source: Five9 Inc.

What: Shares of Five9 Inc. (FIVN 4.20%) were up 14.7% as of 2:00 p.m. EST Wednesday on no company-specific news, but rather after fellow cloud-based call center software specialist inContact agreed to be acquired.

So what: More specifically, shares of inContact jumped more than 53% Wednesday morning after announcing it has entered into a definitive agreement to be acquired by NICE Systems for $14 per share, or roughly $870 million. So with no new press releases, SEC Filings, or significant news of any kind directly related to Five9 -- which boasted a similar market capitalization to inContact prior to this morning's announcement -- it seems Five9 shares are following suit on the wave of optimism for the category, or perhaps the hope Five9 might find a suitor of its own.

Now what: We should also keep in mind that Five9 stock is up nearly 80% over the past year as of this writing. To Five9's credit, some of those gains came on the heels of the company's better-than-expected first-quarter earnings report earlier this month, which saw gross margin expand 510 basis points, to 56.3%, revenue climb 26% year over year, and its annual dollar-based retention rate grow from 96% to 98%.

But investors should also note Five9 remains unprofitable based on generally accepted accounting principles, namely as it invests in top-line growth and taking market share in these early stages. So while Five9 is certainly on the right track to that end, investors would be wise to focus first on the factors driving its business -- which happen to be encouraging -- and not on the unlikely possibility of that business being acquired so shortly after a peer.

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Stocks Mentioned

Five9, Inc. Stock Quote
Five9, Inc.
FIVN
$100.50 (4.20%) $4.05
NICE Ltd. Stock Quote
NICE Ltd.
NICE
$205.47 (2.29%) $4.59

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