At times, it is prudent to hold on to certain stocks that have enough potential but are weighed down by tough market conditions. Five9, Inc. (FIVN - Free Report) seems to be one such stock, which investors should retain if they are looking to reap long-term benefits. Though the stock is facing a few headwinds at the moment, these are transitory in nature. There is enough scope for this Zacks Rank #3 (Hold) company to rebound in the long run.
In fact, Five9has gained 56% in the year-to-date period, outperforming the industry’s rally of 19%.
Factors In Favor of Five9
Five9 offers a virtual contact center cloud platform that acts as a hub for interaction between clients and customers. This facilitates contact center operations focused on inbound or outbound customer interactions within a single unified architecture. The company offers software products such as workforce management, speech recognition, predictive dialer and voice applications.
The cloud-based contact center solution industry has been witnessing growth over the past several quarters as organizations are looking for ways to minimize costs and improve customer support. We believe that Five9 has been capitalizing on this opportunity, which is a tailwind.
Moreover, the company’s consistent focus on expanding product portfolio will aid financial performance.
The company has an expected EPS growth rate of 20%. Notably, the stock has delivered positive earnings surprises in the trailing four quarters with an average beat of 100%.
In the last 60 days, the Zacks Consensus Estimate for Five9’s current year witnessed upward revisions. The Zacks Consensus Estimate for current year is now pegged at 1 cent compared with a loss of 2 cents projected 60 days ago.
We note that Five9 currently has a trailing 12-month Price/Book Value (P/B) ratio of 37.50. This level compares unfavorably with what the industry witnessed over the last year. The ratio is higher than the average level of 31.52. Hence, valuation looks slightly stretched from a P/B perspective.
Furthermore, intensifying competition from small and large players like Cisco Systems (CSCO - Free Report) is likely to dent Five9’s first-quarter performance.
We expect the aforementioned factors to help the company sustain strong momentum and stay afloat amid difficult times. Consequently, we suggest that investors hold on to the stock for the time being.
A few better-ranked stocks worth considering are Applied Materials, Inc. (AMAT - Free Report) and NVIDIA Corporation (NVDA - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Long-term expected EPS growth rate for Applied Materials and NVIDIA is 17.1% and10.3%, respectively.
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