Five9 Inc. (NASDAQ:FIVN) is one of the best small cap tech stocks with high upside potential. On February 19, Five9 delivered a strong performance in Q4 2025, with total revenue reaching $300 million and 8% year-over-year growth. A primary driver was the company’s enterprise AI revenue, which accelerated by 50% to surpass a $100 million annual run rate. This was supported by a 12% increase in subscription revenue, which now accounts for the vast majority of the company’s total earnings. Management acknowl ...

Wall Street’s outlook for Five9 (FIVN) reflects a wide spectrum of sentiment, but at the bullish end, some analysts see major upside potential ahead. Among the latest forecasts, the Street-high price target set by Northland Capital Markets sits at about $47, markedly above the current trading range and signaling significant optimism about the cloud contact-center software provider’s growth prospects. This estimate reflects 164.9% upside from yesterday's closing price. Northland Capital has rated the stock ...

Group 1 - Five9 Incorporated (NASDAQ:FIVN) is identified as one of the small-cap software infrastructure stocks with significant upside potential, with a current upside of more than 59% despite a price target reduction from $30 to $26 by Morgan Stanley [1][3] - Barclays analyst Raimo Lenschow also reduced his target price on Five9 from $29 to $25 while maintaining an Overweight rating, indicating an upside potential of over 53% based on steady macro and IT spending [4] - The company operates as a contact center as a service (CCaaS) provider, offering a cloud-based CX platform that includes applications for customer service, sales, and marketing, featuring services like virtual assistance and AI insights [5] Group 2 - Application SaaS companies, including Five9, have shown weaker returns in 2025 compared to the broader software segment, although AI-related risks may be less severe than expected, leading to a more favorable outlook for the segment [3] - The software sector is currently out of favor, with depressed valuations and limited signs of increased software spending, prompting analysts to be cautious and selective in their outlook [4]

Group 1 - Shares of RingCentral surged by 34% and Five9 by approximately 14% after both companies reported earnings that exceeded Wall Street's estimates and provided positive guidance, alleviating fears regarding the impact of artificial intelligence on their business models [1] - Both RingCentral and Five9 indicated that the accelerating adoption of AI has increased demand for their customer service solutions, which include voice integration [1] Group 2 - Recent weeks have seen a significant selloff in the software sector due to concerns that new AI tools from companies like Anthropic and OpenAI could disrupt traditional software-as-a-service business models [2] - The iShares Expanded Tech-Software Sector ETF has declined by about 23% this year, with notable declines from companies such as Atlassian, Unity Software, and Rapid7, which have lost more than half their value [3] - Major software companies like Salesforce and Microsoft have also experienced significant drops in their stock prices, with declines of 30% and 18% respectively [3]

Core Insights - Five9 reported a strong fourth-quarter performance with total revenue of $300 million, reflecting an 8% year-over-year increase, and subscription revenue grew 12% year-over-year, indicating an acceleration in growth trends [1][3][6] - The company experienced a leadership transition with Amit Mathradas taking over as CEO on February 2, focusing on product innovation, AI, and operational execution [2][4] - Enterprise AI bookings more than doubled year-over-year, contributing to a backlog and pushing annual run-rate revenue for enterprise AI past $100 million [1][5] Financial Performance - For fiscal year 2025, Five9 achieved total revenue of $1.15 billion, up 10% year-over-year, with subscription revenue growth of 13% [14] - The adjusted EBITDA margin for Q4 was 26%, an increase of approximately 260 basis points year-over-year, and free cash flow reached $67 million, representing 22% of revenue [7][8] - Five9 provided guidance for 2026 with a revenue midpoint of $1.254 billion and a non-GAAP EPS midpoint of $3.18, alongside expectations for at least a 24% adjusted EBITDA margin [15][16] Growth Drivers - The company identified two primary growth engines: enterprise AI and core CCaaS, with enterprise AI revenue growth accelerating to 50% year-over-year in Q4 [9][5] - Five9's partner strategy is significant, with over 80% of business being partner-influenced, and the number of certified partners doubled in 2025 [7] - The company is focusing on verticals such as financial services, healthcare, and retail, which reflect the complexity and regulatory demands of enterprise deployments [13] Strategic Initiatives - Five9 is positioning itself as an end-to-end customer experience platform leveraging conversational data and orchestration as a competitive advantage [5][10] - The company completed a $50 million accelerated share repurchase on February 2, buying back approximately 2.6 million shares [17] - Five9 plans to host an Investor Day in late 2026 to provide further details on strategic priorities and long-term financial outlook [16]

Company Overview - Five9 is a leading provider of cloud software for contact centers, focusing on scalable, multi-channel customer engagement solutions [6] - The company serves various sectors including banking, healthcare, technology, and education, utilizing advanced technologies like natural language processing and automatic speech recognition [9] Financial Performance - For the trailing twelve months (TTM), Five9 reported revenue of $1.1 billion and a net income of -$31.3 million [4] - The market capitalization of Five9 is $1.30 billion, with shares priced at $16.57 as of February 12, 2026, reflecting a 59.8% decline over the past year [4][8] Recent Developments - Gagnon Advisors, LLC increased its holdings in Five9 by 168,891 shares, valued at approximately $3.58 million, raising its stake to 4.28% of reportable assets under management (AUM) [2][8] - Following the transaction, the valuation of Gagnon’s position in Five9 increased by $2.69 million due to additional shares and market price changes [2] Market Sentiment - Despite a negative sentiment surrounding Five9, the company reported record third-quarter revenue of $285.8 million, an 8% year-over-year increase, with adjusted EBITDA reaching $71.7 million, resulting in a 25.1% margin [10] - Operating cash flow for the quarter was $59 million, up from $41.1 million a year earlier, indicating improved operational efficiency [10]

Core Insights - Five9, Inc. (NASDAQ:FIVN) is identified as one of the 14 oversold value stocks to consider for investment [1] - The company's shares hit a 52-week low of $16.10, down over 60% from its 52-week high of $49.90, reflecting significant challenges in the SaaS sector [2] - Five9 announced an expanded partnership with Google Cloud, launching a joint Enterprise CX AI solution that enhances customer experience and operational agility [3] - Morgan Stanley reduced its price target for Five9 from $30 to $26, maintaining an 'Equal Weight' rating, while noting the underperformance of the SaaS sector [4] - Five9 specializes in AI-driven contact center solutions, including routing, analytics, workforce management, and reporting for enterprises [5] Company Developments - The partnership with Google Cloud integrates Five9's AI-Infused Intelligent CX Platform with Google's Gemini Enterprise and Vertex AI, aiming to deliver personalized customer experiences [3] - The recent price target adjustment by Morgan Stanley reflects broader market conditions and expectations for AI-related risks in 2026 [4] Market Context - Five9's stock performance is indicative of broader headwinds faced by the SaaS sector, which has seen significant declines [2][4] - The company is positioned within a competitive landscape of AI-driven solutions, with ongoing developments aimed at enhancing its market offering [5]

Core Insights - The fourth-quarter 2025 earnings for Internet stocks were significantly influenced by the acceleration of artificial intelligence (AI) adoption and substantial infrastructure investments, with major tech companies increasing capital expenditures, notably Meta's spending nearly doubling to $115-$135 billion for 2026 to support AI initiatives [1][4] - AI-driven demand led to strong revenue growth, particularly benefiting software analytics companies and cloud computing providers, while social media platforms saw revenue boosts from strong advertising demand and improved AI-powered recommendation algorithms [1][4] Company Performance - Meta Platforms (META) experienced a strong fourth-quarter performance, benefiting from increased AI integration across its services, which reach over 3.58 billion users daily, and an improved recommendation system that enhances user engagement [2] - Spotify Technology is expected to report fourth-quarter revenues of €4.5 billion, reflecting a 13% year-over-year growth, with significant user engagement driven by AI-driven personalization and a 54% surge in video podcast consumption [12] - Fastly anticipates fourth-quarter revenues between $159-$163 million, with a non-GAAP EPS of 4-8 cents, supported by accelerating security revenue and successful cross-sell initiatives [14] - Akamai Technologies is projected to benefit from robust growth in Cloud Infrastructure Services, with annual recurring revenue growth of 40-45%, driven by major contract wins and AI-driven demand [16] - Five9 expects sequential revenue growth towards a guided $297.7 million midpoint, fueled by strong backlog conversion and a 41% year-over-year surge in enterprise AI revenue [18] Market Dynamics - The digital advertising market showed resilience, benefiting from improved targeting technologies that enhanced return on investment for advertisers, while cloud infrastructure demand continued to expand as enterprises accelerated digital transformation initiatives [5] - The Federal Reserve's monetary easing cycle has supported growth-oriented Internet stocks, creating a more favorable financial environment, alongside seasonal market patterns that historically boost fourth-quarter performance [6] - Despite these positive dynamics, tariff-related uncertainties and economic deceleration concerns pose challenges, particularly for advertising-dependent business models and traditional software application companies [7][8]

Group 1: Company Overview - Five9 Inc. (NASDAQ:FIVN) provides intelligent cloud software for contact centers, offering a customer experience (CX) platform that includes a suite of applications for customer service, sales, and marketing functions [4]. Group 2: Analyst Ratings and Price Targets - Morgan Stanley lowered its price target for Five9 to $26 from $30 while maintaining an Equal Weight rating, noting that SaaS stocks lagged behind the broader software and technology sectors in 2025 [1]. - Barclays analyst Raimo Lenschow reduced the price target on Five9 to $25 from $29, keeping an Overweight rating, as part of a generally positive outlook for the software sector despite the lowered targets [3]. Group 3: Market Outlook - There is growing evidence that AI-related risks may be less severe than previously anticipated, leading to a more positive outlook for the SaaS group in 2026 [2]. - Despite the positive outlook, there is a persistent lack of widespread upward revisions in corporate spending, leading firms to remain selectively opportunistic [2]. - Barclays cited stable macroeconomic conditions and IT spending, along with low stock valuations and the sector being currently out of favor, as reasons for a favorable setup in the coming year [3].

Core Thesis - Five9, Inc. is viewed positively despite trading at distressed valuations, with signs of stabilizing fundamentals and potential for growth reacceleration [2][4] Valuation and Financial Metrics - As of January 29th, Five9's share price was $17.79, with trailing and forward P/E ratios of 46.84 and 5.58 respectively [1] - The company has an enterprise value of approximately $1.7 billion, trading at about 1.5 times forward sales and a modest multiple of adjusted EBITDA [2] Business Fundamentals - Five9's AI-enabled Intelligent CX platform is integrated with over 3,000 enterprise customers, supporting omnichannel interactions and benefiting from long-term growth in the CCaaS market [3] - The company has shown positive GAAP profitability, declining stock-based compensation, and initiated share buybacks [2][3] Strategic Initiatives and Governance - Activist involvement from various firms has increased pressure on Five9's governance and strategy, leading to board refreshment and tighter compensation controls [4] - The retirement of the long-tenured CEO and the appointment of a new CEO with strong AI credentials are seen as moves towards enhancing shareholder value [4] Market Position and Competitive Landscape - Growth has slowed significantly from pandemic highs, raising concerns about AI disruption and competitive saturation, but bulls believe this slowdown represents a trough rather than a terminal decline [2] - The company is perceived as a pre-deal asset, positioned for a potential rerating or acquisition as growth prospects improve [4]