NICE’s shares could hit a fresh record high of $334, surging more than 30% from the last price, according to Morgan Stanley analysts, who said a substantial growth opportunity is still in front of the company, translating to at least 20% cloud growth through 2023.
Last month, NICE Systems reported revenue of $410 million in the third quarter, up 6.1% from the same period last year. Revenue from cloud activities rose 33.9% to $202 million while sales of products and services dipped 32% and 5.2% respectively. The software provider reported diluted EPS came in at $1.41 versus $1.30 last year, 8% growth year-over-year.
“A market-leading cloud contact center business looks poised to sustain 20%+ growth as large enterprises accelerate the shift to cloud. Against this backdrop, NICE looks undervalued when compared to FIVN & RNG using a SoTP analysis, creating an attractive opportunity at current levels. Upgrade to Overweight,” said Sanjit Singh, equity analyst at Morgan Stanley.
“With respect to NICE’s cloud opportunity, we note that: 1) just 19% of agent seats are deployed in the cloud today suggesting that majority of the market opportunity still lies ahead, 2) the current pandemic has heightened the need for flexibility and agility which we believe is causing the large enterprise market to accelerate plans to transition their operations to the cloud, and 3) NICE is well-positioned to take a significant share of seats in the larger enterprise market given its market leadership position in CCaaS with over 500K agents on CXOne and with more than 85% of Fortune 100 and 25K customers overall.”
NICE’s shares surged closed 2.4% higher at $256.08 on Wednesday; the stock is up about 50% so far this year.
Morgan Stanley gave a target price of $589 under a bull-case scenario and $180 under the worst-case scenario. Other equity analysts also recently updated their stock outlook. Jefferies lifted their target price to $285 from $265 and gave the stock a “buy” rating. Oppenheimer lifted their target price to $250 from $230 and gave the stock an “outperform” rating.
In addition, JP Morgan upgraded shares from an “underweight” rating to a “neutral” rating and lifted their target price to $261 from $210. Rosenblatt Securities lifted their target price to $290 from $265 and gave the stock a “buy” rating.
Eleven equity analysts forecast the average price in 12 months at $280.73 with a high forecast of $334.00 and a low forecast of $246.00. The average price target represents a 9.63% increase from the last price of $256.08. From those 11 analysts, eight rated “Buy”, three rated “Hold” and none “Sell”, according to Tipranks.
“Since acquiring InContact in November 2016, NICE has emerged as one of the leading players in the fast-growing Contact Center as a Service (CCaaS) market which has helped the company sustain 28% CAGR in its cloud business since 2017 including 31% YoY thru first three quarters of 2020,” said Sanjit Singh, equity analyst at Morgan Stanley.
“With the cloud now set to represent the majority of the business, we are Overweight shares as we believe that a substantial growth opportunity is still in front of the company translating to at least 20%+ cloud growth thru 2023 and that NICE’s cloud business is substantially undervalued relative to its CCaaS peers such as FIVN and RNG,” Singh added.