What Happened?
Shares of cloud contact center software provider Five9 (NASDAQ: FIVN) fell 8.5% in the afternoon session after the company issued a disappointing revenue forecast for the next quarter, which overshadowed its otherwise solid third-quarter results.
While Five9 met Wall Street's revenue expectations for the third quarter with an 8.2% year-on-year increase to $285.8 million and beat profit estimates, its guidance for the next quarter fell short. The company's forecast of $297.7 million was about 0.8% below what analysts had estimated, raising concerns about future growth. Adding to the negative sentiment, analyst James Fish from Piper Sandler reportedly reduced the price target for the stock to $26.00 from $31.00, though the firm maintained its 'Overweight' rating. The market's reaction suggested that the weaker outlook outweighed the positive aspects of the report, which included an earnings beat for the quarter and raised full-year profit guidance.
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What Is The Market Telling Us
Five9’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock dropped 4.4% on the news that markets became increasingly wary of high valuations following a significant AI-driven rally.
The tech-heavy Nasdaq fell approximately 1.4% as a wave of caution swept through the market. A key example of this trend is Palantir Technologies, which saw its shares drop around 7% despite reporting record quarterly results that surpassed analyst estimates and raising its full-year revenue outlook. This seemingly contradictory movement highlighted a broader sentiment shift. Investors appeared to be engaging in profit-taking, concerned that the recent surge in AI-related stocks had led to stretched valuations. This broader market caution affected high-growth technology companies that had previously surged on AI optimism but faced increased scrutiny, signaling a potential cooling-off period for the sector.
Adding serious weight to this caution, leadership at both Goldman Sachs and Morgan Stanley highlighted the possibility of a correction in the equity markets over the next couple of years. Despite the euphoria driven by AI optimism and the promise of future rate cuts, these banks viewed this cooling-off period not as a disaster, but as a necessary and healthy feature of a long-term bull market.
Five9 is down 54.4% since the beginning of the year, and at $18.45 per share, it is trading 57.5% below its 52-week high of $43.41 from December 2024. Investors who bought $1,000 worth of Five9’s shares 5 years ago would now be looking at an investment worth $130.57.
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