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NICE’s Acquisition of LiveVox: Analysts Evaluate Potential Benefits

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Key Points:

  • Oppenheimer analyst Timothy Horan reiterates Outperform rating on NICE, with a price target of $225
  • LVOX’s acquisition by NICE is an all-cash deal valued at $387 million, with estimated contribution of $100 million to cloud revenue in 2024
  • NICE can leverage LVOX’s cost-cutting measures and high-quality customer base to improve performance
  • RBC Capital Markets analyst Rishi Jaluria maintains Outperform rating on NICE, with a price target of $238

Analysis:

On Thursday, NICE Ltd (NICE) announced its acquisition of LiveVox Holdings, Inc (LVOX) for $3.74 per share, equivalent to a firm value of $387 million. This move has prompted analysts to evaluate the potential impact on NICE’s business and financial performance.

Oppenheimer analyst Timothy Horan remains bullish on NICE, reiterating an Outperform rating on the stock with a revised price target of $225, down from $250. Horan believes that NICE can further accelerate LiveVox’s cost-cutting measures and expects the acquisition to contribute $100 million to NICE’s cloud revenue in 2024. This aligns with NICE’s focus on its Customer Engagement business which is driven by increasing compliance and risk-management efforts as well as corporate cost reduction initiatives.

In terms of financial performance, Horan has raised his 2024 EPS estimate by 1% due to LiveVox’s lower EBITDA margins. He views LiveVox’s high-quality product and customer base as a positive addition to NICE’s CXone platform. Furthermore, Horan emphasizes that NICE is well-positioned for growth, with EPS expected to increase by more than 15% annually. Additionally, NICE has the potential to generate over $700 million per year in free cash flow, which, given current short-term interest rates, could contribute an additional $35 million per year to earnings. Horan suggests that NICE could consider aggressive stock buybacks, as the company’s earnings multiple is relatively low at 17x and it holds $1 billion in cash reserves.

RBC Capital Markets analyst Rishi Jaluria also maintains an optimistic outlook on NICE, maintaining an Outperform rating and a price target of $238. Jaluria notes that LiveVox’s strengths in outbound communications and its presence in Business Process Outsourcing (BPO) are complementary to NICE’s platform. He further highlights that approximately 25% of LiveVox’s revenue comes from non-voice solutions, which can enhance NICE’s digital and AI offerings.

While there are positive aspects to the LiveVox acquisition, Jaluria points out that consensus models project LiveVox’s non-GAAP operating margins to be 9% in the second half of 2024, significantly lower than NICE’s 30% margins. Additionally, LiveVox has already undertaken a 16% reduction in force in January. These factors suggest that NICE may need to address certain operational challenges and optimize LiveVox’s performance to fully benefit from the acquisition.

In terms of market reaction, NICE shares experienced a slight decrease, trading lower by 1.46% to $167.49 at the time of writing.

Conclusion:

Analysts view NICE’s acquisition of LiveVox as a strategic move that can potentially strengthen NICE’s position in the market. The optimistic outlook is supported by LiveVox’s cost-cutting measures, high-quality product offerings, and customer base. However, there are concerns regarding LiveVox’s lower operating margins and recent reduction in force. Investors may keep a close eye on NICE’s ability to fully leverage the synergies between the two companies and optimize LiveVox’s performance, as this will be critical to the overall success of the acquisition.

Disclaimer: This article is for informational purposes only and does not provide investment advice. All rights reserved.

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