Guggenheim Securities Raises 8x8 Price Target On Improving Metrics

8x8, Inc. (NYSE: EGHT) reported mixed fourth-quarter results Tuesday.

Although metrics are trending up, the cloud communications company has taken a conservative approach to guidance, which could keep the stock rangebound in the near term, according to Guggenheim Securities.

The Analyst

Nandan Amladi maintained a Neutral rating on 8x8 and raised the price target from $20 to $22.

The Thesis

The company reported fourth-quarter revenue that was marginally ahead of the consensus estimates, while missing earnings expectations, Amladi said in a Tuesday note. (See his track record here.) 

Although revenue growth remained at 19 percent for the fiscal year, the share of upmarket revenue rose to 30 percent of the mix, the analyst said. 

The company’s channel and sales capacity investments paid off in the fourth quarter, he said: channel bookings surged 91 in the quarter and the number of partners rose from just 127 at the beginning of fiscal 2019 to end the year at almost 700.

The new 8x8 CFO has taken a conservative approach to 2020 guidance, projecting 20-percent growth in service revenue and pushing out breakeven profitability to the end of 2021, Amladi said. 

Although upmarket revenue growth is accelerating, small-to-medium-sized businesses still represent 64 percent of 8x8’s overall mix, which doesn’t compare well with RingCentral Inc (NYSE: RNG), according to Guggenheim. 

Price Action

Shares of 8x8 were trading down by 5.77 percent at $22.38 at the time of publication Wednesday. 

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