Sometimes, a stock is so strong – showing so much potential – that it’s impossible not to acknowledge it. These are the stocks that get a unanimous ‘Strong Buy’ consensus, and it’s exciting to find them. Companies as diverse as Amazon, Visa, Exact Sciences, and T Mobile have attracted full agreement from the Wall Street analysts. Let’s pull one such stock out of the TipRanks database, and find out why it carries a perfect score.
LivePerson, Inc. (LPSN – Research Report) is a recognized leader in the field of conversational commerce. The company’s messaging systems offer real-time chat service for websites, social media, and e-commerce platforms, with functionality on desktops, laptops, and mobile devices. In short, LivePerson offers the tools that every digital customer service department needs.
What Makes LivePerson a Quality Investment?
Company founder and CEO Rob LoCascio summed up the reasons after the Q4 earnings report at the end of February: “We expect our revenue growth rate to ramp toward 20% by year-end in 2019 and to exceed it 20% in 2020 as we take a greater share of emerging multibillion-dollar market opportunity.”
He made that comment in the context of the recent Q4 earnings report. Quarterly revenues came in high at $65.72 million, an increase of $8.33 million over the year-ago quarter. The revenue gain made up for the lackluster EPS of just one cent per share. Taking a broader look at LPSN’s market performance, we see that since the stock’s most recent trough – at $4.10 in February 2016 – it has gained 587%. LPSN currently trades at $28.20.
In short, LivePerson is a company on a growth trajectory. Returning to CEO LoCascio’s comments, in 2018 the company boasted “16% year-over-year increase in our revenue growth rate, record contract signing, multiyear loan revenue attrition, and accelerating messaging in AI adoptions.”
That was then. Regarding future growth, the company’s CFO, Chris Greiner, said, “We are issuing revenue guidance for 2019 in the range of $285 million to $293 million or 14% to 17% year-over-year growth. … We anticipate an acceleration in the second half towards high-teens to 20% by the fourth quarter. On the back of that momentum, we then expect to generate at least 20% growth for the full year of 2020.”
LivePerson’s recent market performance justifies this optimism. Shares have gained a modest 3% since the earnings call, on the heels of 59% gains through January and February. It’s a strong return for investors, and an answer to our question above, to what makes LivePerson a quality investment.
Floating a Loan
In a move predicated on those strong fundamentals, LivePerson announced on February 28 that it will be floating an issue of convertible notes, totaling $200 million. The notes will be offered to “qualified institutional buyers” – this is a private offering, not public – will carry bear 0.75% interest annually, and will come due on March 1, 2024. As is common with this type of business financing, the notes will be payable in cash, common stock shares, or a combination of the two.
LivePerson anticipates raising between $192 and $221 million in new funding from the note issue, with approximately 10% of the proceeds paying for a series of capped call transactions (as a hedge against volatility), and the rest going towards toward corporate expenses or strategic moves such as acquisitions. Financing a loan of this nature is generally considered a vote of confidence by the company in its own future, and in its ability to generate both institutional support and cash.
Checking in with the Analysts
So where does this put LivePerson now? A multitude of top-rated analysts have come out in favor of LPSN stock over the last few weeks, in the wake of the quarterly earnings and the convertible note issue.
First to weigh in on LPSN was Northland Securities’ Michael Latimore (Track Record & Ratings), five-star analyst ranked in the top 5% of TipRanks’ database. In response to the quarterly report, he said, “We are increasing our FY19 revenue estimates… Increasing FY20 revs and EBITDA.” His $33 price target on the stock implies a 9.2% upside from current levels.
Next up was Oppenheimer’s Koji Ikeda (Track Record & Ratings), also a top 5% analyst. In his note written immediately after the company’s Q4 earnings release, Ikeda made sure to note the strong data points: “Total revenue of $65.7M was ~$600K above consensus; and adjusted EBITDA of $5.3M was ~$200K above consensus. 1Q total revenue guidance of $65.75-66.75M is in line with the $66.1M consensus.”
In his more recent note on LivePerson, Ikeda elaborated the company’s overall stance in the markets, and outlook for the future. He stated, “We believe LivePerson is well positioned to take share in a large B2C messaging opportunity that is disrupting the contact center. Organizations around the world are under pressure to re-think and retool legacy technologies with next-generation customer engagement applications…”
Making it clear that LivePerson offers exactly those communications tools, Ikeda gives the company another $33 price target.
Since March 8, LivePerson as attracted attention from the some of Wall Street’s very best analysts. These two reviews come from analysts ranked in the top 25 of TipRanks’ database, putting them among the most successful market watchers on the Street.
Raimo Lenschow (Track Record & Ratings), initiated coverage of LPSN for Barclays on March 8. He is rated #17 overall, out of 5,250, by TipRanks, with an average success rate of 76%, and an impressive return of 21%.
Regarding LivePerson, he sees the company in a sweet spot, with the tools and savvy to profit from current changes in customer service, and better tech than its competitors. He writes, “LivePerson is positioned at the front and center of evolving B2C communications, which is moving away from painful calls to 1-800 numbers to modern messaging channels such as WhatsApp and Amazon Alexa. We believe this represents a large but still nascent $20bn+ market opportunity…
“We believe the company has a technological lead vs. some of its competitors, which is resulting in marquee customer signings such as T-Mobile and Delta… the current valuation (5x CY20E revenue) remains cheap considering the 20%+ growth prospects by FY20.”
Lenschow’s bullish position is reflected in his $35 price target, suggesting an upside of 15.8% for LPSN shares.
Finally, Piper Jaffray’s Alex Zukin (Track Record & Ratings), ranked #22 overall, on March 25 also initiated coverage of LivePerson. Like his colleagues above, Zukin was impressed by the company’s advantageous situation within the B2C field, and by the stock’s low cost of entry. He views LivePerson “as a relatively inexpensive way to play the business-to-consumer digital transformation trend.” His price target is the most bullish of all, and at $39 it suggests that LPSN has an impressive upside of 29%.
Based on reviews by the best performing analysts over the last three months, LivePerson holds a perfect record: 9 reviews and 9 buy ratings, for a consensus of ‘Strong Buy.’ The stock has a share price of $30 and an average price target of $33, giving it an upside potential of 10%.
Enjoy the Research Report on the Stock in this Article:
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