NICE Earnings Beat Estimates on Robust Growth in Cloud Revenue; Target Price $276

NICE, the worldwide leading provider of software solutions, reported better-than-expected revenue and profit in the third quarter, largely driven by a record surge in cloud revenue amid the ongoing COVID-19 pandemic.

The company which provides enterprise software solutions worldwide 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.

NICE Systems reported diluted EPS of $0.76 versus $0.69 last year, 10% growth year-over-year. Excluding items, Diluted EPS came in at $1.41 versus $1.30 last year, 8% growth year-over-year. That was also higher than the market expectations of $1.39 per share.

“Narrow-moat Nice reported solid third-quarter results, with revenue and adjusted EPS largely in line with the company’s guidance and slightly ahead of our above-consensus expectations. Cloud revenue acceleration and adoption by large enterprise customers drove the quarter. Consistent with many companies we cover, management pointed to an acceleration of digital transformation efforts as it relates to the contact center as a result of COVID-19,” said Dan Romanoff, equity analyst at Morningstar.

“Our model is in line with CapIQ consensus for both revenue and adjusted EPS for 2021, and as a result, we are maintaining our fair value estimate of $199 per ADR. While we think the company is performing well, we continue to struggle with valuation across many companies within our coverage.”

NICE shares closed 0.62% higher to $247.53 on Thursday. However, the stock is up about 60% so far this year.

Executive comments

“Cloud grew a record 35% and now represents 50% of our total revenue, which is a major milestone for NICE. We achieved 10% sequential growth in the cloud compared to the second quarter of this year, and we already surpassed the more than 800 million dollar cloud revenue run rate that we had originally expected by the end of the year,” said Barak Eilam, CEO, NICE.

“The acceleration in our cloud growth is being driven by several factors, including substantial growth in new customers, rapid adoption by large enterprises, new verticals that are embracing remote service and digital transformation that has become front and center for organizations of all sizes. We witnessed an increase of over 50% in new customers compared to the same quarter last year. Additionally, we saw a 91% sequential increase in digital volumes for CXone, and a 154% increase year-over-year, confirming the strength of our leadership in digital,” Eilam continued.

NICE Stock Price Forecast

Nine equity analysts forecast the average price in 12 months at $276.33 with a high forecast of $302.00 and a low forecast of $250.00. The average price target represents an 11.65% increase from the last price of $247.50. From those nine analysts, seven rated “Buy”, two rated “Hold” and none rated “Sell”, according to Tipranks.

Morgan Stanley gave the base target price of $230 with a high of $310 under a bull-case scenario and $165 under the worst-case scenario. The firm currently has an “Equal-weight” rating on the software provider’s stock. Rosenblatt Securities raised their stock price forecast to $290 from $265.

Several other analysts have also recently commented on the stock. Wedbush upped their price objective to $275 from $250; RBC raised the target price to $250 from $216; Citigroup raised their price target to $292 from $254. Oppenheimer lifted their target price to $250 from $230 and gave the company an outperform rating.

Analyst Comments

“Key acquisitions for customer interaction analytics and for the market-leading, cloud-based contact center positions NICE to provide a fully integrated platform that combines cloud-based routing, workforce optimization and analytics in a single platform,” said Sanjit Singh, equity analyst at Morgan Stanley.

“Despite the ability to eclipse the rate of market growth, we forecast a 7% revenue CAGR and a 12% EPS CAGR thru 2021 reflecting slower growth in workforce optimization and the Financial compliance businesses. At 37x CY21e EPS, current valuation looks to capture the attractive share gain opportunity in the enterprise.”

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