Stifel Initiates Coverage Of 3 Communications Software Leaders

Stifel initiated coverage on three communications software companies Wednesday: Five9 Inc FIVN, RingCentral Inc RNG and 8x8, Inc. EGHT. A common theme among them is strong positioning as leading cloud-based solution providers in fast-growing markets.

The Ratings

Stifel analyst Matthew Van Vliet initiated coverage of Five9 with a Hold rating and $36 price target.

Vliet initiated coverage of RingCentral with a Buy rating and $100 price target. 8x8 also received a Buy rating with a $25 price target.

The Thesis

Five9 is the “leading cloud-native contact center solution on the market,” Van Vliet said in an initiation note. Similarly, the analyst called RingCentral the “leading provider of cloud-native communications services for businesses of all sizes” and 8x8 the “technology leader in cloud communications as a service.”

Less than 15 percent of those markets have made the switch to cloud-based solutions, implying significant room to run.

Five9 has seen revenue grow consistently by more than 20 percent annually for the past few years, with margins also expanding 40 percent in four years, Van Vliet said. The company’s stock has moved in line with this appreciation, meaning that investors should consider waiting for a better buying opportunity.

RingCentral has seen its leadership increase in recent years thanks to its broad approach to delivering essential communications channels and enterprise-grade scalability while maintaining significant investment in product development, the analyst said. 

RingCentral is playing a long game to mixed reviews, but will ultimately deliver real value to shareholders, Van Vliet said. 

8x8 is also maintaining heavy investment in their products, as well as staff and go-to-market strategies, the analyst said. In fiscal 2018, the company reshuffled its senior management team with several new hires focused on marketing and sales.

As businesses increasingly standardize around key communications software, 8x8 appears well-positioned to respond to the demands of businesses. 

“The third wave of communications is cresting and 8x8 is poised to capture a significant portion of the market,” Van Vliet said. 

Price Action

Five9 shares were trading up 0.69 percent at the time of publication Thursday, while RingCentral was rallying 5.38 percent and 8x8 was up 5.6 percent. 

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Photo courtesy of RingCentral.