LivePerson Stock Up 417% Since March 2020; More to Come for Patient Investors

LPSN stockWhy LivePerson, Inc. Could Be the Must-Have Digital Enterprise Play

If you’ve ever required help with products or services via a real-time online chat, there’s a good chance the chatbot technology was provided by LivePerson, Inc. (NASDAQ:LPSN).

The company’s chatbot platform employs artificial intelligence to answer questions from visitors to web sites. The idea is that people get real-time answers to basic questions instead of having to phone or e-mail. The service is widely employed in retail, finance, telecom, travel, insurance, and education.

LivePerson, Inc. is a top player in the segment.

The market rewarded LPSN stock with a record high of $72.23 on February 8. As of this writing, the stock is up 417% from its March 2020 low and up 118% year-over-year.

Advertisement

The LivePerson stock chart is bullish, with a strong V-shaped rally after the March 2020 low to the record highs. The stock surged last May on a bullish upside trade gap, followed by a golden cross pattern and a second upside trade gap in August.

LPSN stock is currently breaking out from a multi-month accumulation channel.

Chart courtesy of StockCharts.com

Revenue Acceleration Bodes Well for LPSN Stock

After stalling in 2016 and 2017, LivePerson, Inc. recorded two years straight of double-digit revenue growth, to a record $291.6 million in 2019.

Fiscal Year Revenues (Millions) Growth
2015 $239.0 N/A
2016 $222.8 -6.8%
2017 $218.9 -1.8%
2018 $249.8 14.2%
2019 $291.6 16.7%

(Source: “LivePerson Inc.” MarketWatch, last accessed February 22, 2021.)

The company’s revenue growth is expected to continue. Analysts estimate that LivePerson increased its revenue growth rate to 24.6%, to $363.4 million, in 2020. They estimate that the company will grow its revenue by 23.2% to $447.7 million in 2021. (Source: “LivePerson, Inc. (LPSN),” Yahoo! Finance, last accessed February 22, 2021.)

While its revenues ratchet higher, LivePerson will need to move toward consistent positive earnings before interest, taxes, depreciation, and amortization (EBITDA).

Fiscal Year EBITDA (Millions) Growth
2015 $9.4 N/A
2016 $8.9 -5.2%
2017 $1.8 -79.8%
2018 -$1.6 -190.2%
2019 -$65.7 -3,920.3%

(Source: MarketWatch, op. cit.)

LivePerson, Inc. will also need to move toward consistent profitability in terms of generally accepted accounting principles (GAAP) diluted earnings per share (EPS).

Fiscal Year GAAP Diluted EPS Growth
2015 -$0.47 N/A
2016 -$0.46 2.1%
2017 -$0.32 30.4%
2018 -$0.42 -32.1%
2019 -$1.53 -263.0%

(Source: MarketWatch, op. cit.)

On an adjusted basis, the company is heading toward profitability. Its adjusted loss is expected to have narrowed to $0.12 per diluted share in 2020, compared to a loss of $0.52 per diluted share in 2019.

For 2021, the consensus estimate is that LivePerson, Inc. will report a loss of $0.13, although the high estimate calls for profits of $0.24 per diluted share. (Source: Yahoo! Finance, op. cit.)

The company managed to report positive free cash flow from 2014 to 2016, prior to reporting three years of negative readings as the company spent capital on growing its revenues.

Fiscal Year Free Cash Flow (Millions) Growth
2015 $8.8 N/A
2016 $12.2 38.0%
2017 -$7.1 -158.1%
2018 -$17.2 -141.7%
2019 -$107.1 -524.3%

(Source: MarketWatch, op. cit.)

Analyst Take

Institutional ownership of LivePerson stock is high, at about 94% of the outstanding shares. The ownership is broad, with 329 institutions holding LPSN stock. (Source: Yahoo! Finance, op. cit.)

Like the majority of high-growth technology stocks, LivePerson, Inc.’s valuation is high. LivePerson stock trades at 14 times trailing sales and 10.7 times its consensus 2021 sales estimate. While the valuation is high, it’s currently what the market is assigning to growth stocks.