Five9 Earnings: Macro Pressures Sour Near-Term Outlook but Attractive Industry Tailwinds Persist

We lower our fair value estimate for no-moat Five9 to $58 per share, from $63, following the release of sound second-quarter results but disappointing near-term guidance. Second-quarter top-line growth and profitability exceeded our expectations. However, Five9 reported weak new business bookings amid softening macroeconomic conditions, elevated budget scrutiny, and sales execution issues, which together point to a weaker second half than we previously anticipated. Accordingly, we have trimmed our near-term seat growth assumptions, partly offset by an accelerated path to GAAP profitability relative to our prior forecasts. Despite these headwinds, we believe Five9 has an attractive growth profile buoyed by the ongoing contact center cloud transition, and we continue to view shares as undervalued on a risk-adjusted basis.