NICE Up 9% in a Month: How Should Investors Play the Stock?

NICE NICE shares have gained 9% in the past month, outperforming the Zacks Internet Software industry's decline of 0.1%.

The upside can be attributed to NICE's strong growth prospect. It boasts an innovative portfolio with growing adoption of solutions like Actimize, Evidencentral, Inform Elite and CXone. The company's focus on its cloud offerings, particularly its CXone platform, has been a major growth driver.

In the first quarter of 2024, NICE reported cloud revenues of $468.4 million, up 27% year over year. It witnessed a remarkable 200% year-over-year increase in AI deals in first-quarter 2024, highlighting the increasing demand for AI-driven CX solutions.

NICE's efforts to enhance its customer base on the back of its robust cloud solutions is a key catalyst. It has more than 25K customers with more than 85% of Fortune 100 customers.

For 2024, cloud revenues are expected to grow roughly 18% or more. NICE's continuous investments in the global expansion of its cloud platform will help its aim of reaching 75% cloud gross margin in the next three to five years, which reflects the benefits of an innovative portfolio.

Robust Portfolio Boosts NICE's Prospects

NICE's policy of frequently updating its portfolio has been a key catalyst as it helps in fending off competitors from other industry players like Five9 FIVN, Salesforce and 8X8 EGHT.

YTD Performance

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These competitors have also been extending their offerings in the CX market. Five9 recently announced an enhanced collaboration with Salesforce, integrating AI-powered solutions to improve customer experiences in contact centers. In February, 8x8 launched 8x8 Engage, an AI-powered solution that facilitates cross-organization customer engagement.

NICE launched CXone Mpower, integrating Copilot, Autopilot and Actions into a CX-aware AI platform in June.

NICE Actimize is advancing with its upcoming IFM (Integrated Fraud Management) version 11, integrating AI throughout the fraud management lifecycle to enhance accuracy, agility, and operational efficiency through intelligent orchestration and network analytics powered by GenAI.

It has launched the next generation of Enlighten Copilot designed specifically for supervisors and CX decision-makers powered by purpose-built AI.

A deepening partnership with Microsoft is noteworthy. NTR-X Compliance Recording and Assurance Solution has secured transactable solution status in Microsoft's Azure Marketplace.

Strong Liquidity Position

NICE has expanded its share repurchase program, with its board of directors approving a new $500 million program. It plans to accelerate share buyback under the current $300 million program.

The latest program reflects NICE's commitment to continuously improve shareholders' returns. Its strong balance sheet makes the capital distribution activity sustainable.

As of Mar 31, 2024, cash and cash equivalents (including short-term investments) were $1.5 billion. In the first quarter of 2024, NICE generated $254.5 million of net cash from operations.

In the trailing 12 months ending Mar 31, 2024, net cash from operations was $621 million, with free cash flow of $537.5 million providing ample liquidity.

Estimate Revisions Are Positive

For second-quarter 2024, NICE projects non-GAAP revenues between $657 million and $667 million, indicating 14% year-over-year growth at the midpoint. Non-GAAP earnings are estimated in the $2.53-2.63 per share band, suggesting a 21% year-over-year rise at the midpoint.

The Zacks Consensus Estimate for revenues is pegged at $662.88 million, indicating 14.07% growth year over year. The consensus mark for earnings is pegged at $2.58 per share, up 0.8% over the past 60 days, indicating a 21.13% year-over-year increase.

Estimate Revision

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For 2024, total revenues are expected to grow between 14% and 15% to $2.72-$2.74 billion. NICE expects earnings between $10.53 and $10.73 per share, indicating year-over-year growth in the 20-22% range.

The Zacks Consensus Estimate for revenues is pegged at $2.73 billion, indicating 14.73% growth year over year. The consensus for earnings is pegged at $10.64 per share, up 0.4% over the past 60 days and indicating a 21.05% year-over-year increase.

Conclusion

NICE is benefiting from strong momentum across its cloud business, driven by the rising adoption of the CXone platform. Its growth prospect, as indicated by the Growth Style Score of A, is hard to ignore.

The Value Style Score of B also suggests NICE is undervalued at this moment.

However, a challenging macroeconomic environment has been a concern. The shares are trading below the 50-day moving average, indicating a bearish trend.

NICE Trading Below 50-Day SMA

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NICE currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. However, investors who already own the stock may expect the company's growth prospects to be rewarding over the long term.

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