We recently compiled a list of the 10 Oversold Tech Stocks To Buy Right Now. In this article, we are going to take a look at where Five9, Inc. (NASDAQ:FIVN) stands against the other oversold tech stocks.
In an interview with CNBC on September 30, Dave Sekera, Chief Market Strategist at Morningstar, shared his insights on the current state of the technology sector and the broader market. According to Sekera, the technology sector as a whole is “priced to perfection” and is trading at a 6% premium to fair value.
However, Sekera believes several technology stocks have run up too far trading at over 20% premium to fair value, whereas their sales have been sluggish. Sekera advises taking profits off the table for companies who are trading at a premium to fair value. Sekera’s team is also concerned that the market is overestimating the long-term growth potential of some companies due to artificial intelligence (AI), however, he believes that some of these companies will not benefit enough from AI to justify their current valuation. Sekera recommends four-star rated stocks that are trading at a discount to fair value and suggests swapping out overvalued companies and overextended AI stocks for these companies. Sekera also discussed the broader market, noting that growth stocks have outperformed value stocks for a while. However, he believes that it’s time to look at small-cap and mid-cap value-oriented names and believes that these types of value stocks are due for a rotation.
Sekera notes that the overall US market is currently trading at a 3% premium to fair value. He believes that this rotation into value stocks and small-cap stocks will be driven by the expectation of slowing economic growth in the US and the easing of monetary policy by the Federal Reserve. Historically, small-cap stocks have performed well in these conditions, and value stocks have been left behind in the frenzy to buy AI-related stocks. Sekera expects value stocks to catch up, and he believes that now is a good time to invest in these undervalued stocks.
With the Fed’s dovish stance and the potential for further rate cuts, tech stocks may continue to be a safe haven for investors, with that in context, let’s take a look at the 10 oversold tech stocks to buy right now.
Our Methodology
To compile our list of the 10 oversold tech stocks to buy right now, we used the Finviz and Yahoo stock screeners to find stocks that have fallen significantly on a YTD basis and have a forward P/E of less than 15, as of October 15. We then narrowed our choices to 10 stocks according to their hedge fund sentiment, which was taken from our database of 912 elite hedge funds as of Q2 of 2024. The list is sorted in ascending order of their hedge fund sentiment, as of the second quarter.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 smallcap and largecap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An IT engineer working on a laptop as planograms for a cloud-based virtual contact center platform appear on the monitor.
Five9, Inc. (NASDAQ:FIVN)
Number of Hedge Fund Investors: 34
Forward P/E Ratio as of October 15: 11.93
YTD Performance as of October 15: -61.61%
Five9, Inc. (NASDAQ:FIVN) provides cloud contact center software (CCaaS) for businesses seeking to enhance customer engagement. The company’s Intelligent CX Platform facilitates seamless communication across various channels, such as phone, email, and social media. Five9, Inc. (NASDAQ:FIVN) has over 2,500 customers and over 1,400 partners globally.
Five9, Inc. (NASDAQ:FIVN) is improving the customer experience through automation and AI. The company’s AI and automation solutions are anticipated to significantly contribute to its future growth and profitability. Management highlighted that these offerings have higher gross margins compared to its traditional contact center software and are expected to drive future revenue growth. Five9, Inc.’s (NASDAQ:FIVN) ability to provide a comprehensive suite of contact center software solutions, including AI and automation, sets it apart in the market and is expected to fuel its growth and profitability.
On October 10, Five9, Inc. (Nasdaq:FIVN) announced its expanded availability in India with the addition of two new data centers in Delhi and Mumbai. This expansion allows the company to better support local and multi-national enterprises in the region, enabling them to power their customer experience strategies more effectively. Additionally, the company has obtained a Department of Telecommunications (DOT) Unified License (Virtual Network Operator) (UL VNO) in India, which enables the company to provide access services, national long-distance, and international long-distance services in the country. This license also allows Five9, Inc. (Nasdaq:FIVN) to partner with local carriers and internet service providers (ISPs) to offer telephony and network connectivity services.
Recently, Five9, Inc. (NASDAQ:FIVN) secured a major client, which is projected to add $50 million in annual recurring revenue (ARR) over the next few years. The increasing demand for AI-powered contact center solutions is a significant catalyst for Five9, Inc. (NASDAQ:FIVN) growth. The AI contact center market is projected to reach $14.6 billion by 2032, and Five9, Inc. (NASDAQ:FIVN) is well-positioned to capture a significant share of this growing market. The company is anticipated to experience 10.18% earnings growth this year. Industry analysts have reached a consensus on the stock’s Buy rating, with an average target price of $51.96 that suggests a 53.99%% upside potential from its current levels.
Overall FIVN ranks 2nd on our list of the oversold tech stocks to buy. While we acknowledge the potential of FIVN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than FIVN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. This article is originally published at Insider Monkey.