Canaccord On Five9: 'This Break Out Should Have Legs'

• Shares of Five9 Inc FIVN have gained more than 75 percent over the past three months.
• David Hynes Jr. of Canaccord Genuity maintained a Buy rating on Five9's shares with a price target raised to $9 from a previous $8.
• The analyst noted the company has meaningful operating leverage in its business model over the next three years and a low-20 percent revenue growth rate is sustainable.

Five9 is a provider of cloud software for contact centers. The stock has seen a tremendous bull charge over the past three months by gaining more than 75 percent. According to David Hynes Jr. of Canaccord Genuity, the recent break out in price "should have legs."

Hynes commented in a note on Wednesday that he recently spent some time with Five9's management team and came away with three key points that solidify his bullish stance: 1) the company's dollar-based retention should "gradually improve" from today's 95 percent, 2) the company's business model has "meaningful operating leverage" over the next three years, and 3) a low-20 percent revenue growth rate is not only "sustainable," but it "could even accelerate."

"In our view, this combination sets the stock up for continued multiple expansion," Hynes argued.

Looking forward to Five9's fourth quarter and full year fiscal 2015 results (sometime in late February), the company is likely to guide its 2016 in-line with the Street's 17 percent growth estimate. However, the analyst noted he would be "disappointed" if the company didn't sustain at least a low-20 percent growth and reach EBITDA breakeven prior to its third quarter 2016 timeline.

Bottom line, the analyst stated that a further 20 percent appreciation in Five9's stock over the next 12 months "feels like a reasonable baseline."

Shares remain Buy rated with a price target raised to $9 from a previous $8.