Twilio (TWLO) and Nice (NICE) are viewed as a communication software players with growth potential and improved performance despite the sector underperforming in much of 2024 due to concerns about small- and medium-sized business demand and artificial intelligence, Morgan Stanley said in a note Wednesday.
The investment firm said that communication software outperformed small- and mid-cap software in 2024 due to free cash flow support and depressed valuations but noted that performance was bifurcated. Companies having positive estimate revisions like Twilio and Zoom (ZM) did better while those with lowered estimates such as Five9 (FIVN) and 8x8 (EGHT) struggled, Morgan Stanley said.
The firm said Nice (NICE) remains its top pick in the sector as the company has strong fundamentals and an attractive valuation with a $26 billion opportunity in the contact center as a service market as AI adoption grows.
"We are seeing signs of greenshoots in small- and medium-sized business demand as we exit 2024, particularly in unified communications as a service," the firm said.
Morgan Stanley boosted its price target on Nice to $246 from $240, on Zoom to $96 from $86, on Twilio to $115 from $77, on Five9 to $46 from $40 and for 8x8 to $2.6 from $2.
Price: 108.54, Change: -1.23, Percent Change: -1.12
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