UPDATE: Bank Of America Reiterates On Five9 On Disappointing Guidance, Intact Thesis

In a report published Tuesday, Bank of America analyst Nikolay Beliov reiterated a Buy rating on Five9 (NASDAQ: FIVN), but lowered the price target from $10.00 to $8.50.

In the report, Bank of America noted, “The stock is down -24% in the after-market after FIVN reported in-line 2Q results and lowered 2014 revenue guidance by 4% ($4mn) at the second earnings call as a public company. This development is clearly disappointing but we believe market fundamentals are positive while the company's technology and product functionality is improving. The $4m impact ($2m per quarter) is split 70% in usage and 30% in seats.

"Six large customers (three healthcare and three business process outsourcers), which remain FIVN customers, scaled back as the Affordable Healthcare Act impacted spending plans. We estimate 1,000+ seats were impacted or ~3% of the install base. FIVN increased net income guidance slightly as it slowed down hiring of non-customer facing personnel. 2Q revenues, gross margins, and EPS came largely in-line. We lower our revenues by $2m/quarter, in-line with the slower spending for 2014 per quarter by these six customers. In light of the market potential, we view the current growth vs margin trade-off as the right strategy.”

Five9 closed on Monday at $7.62.