Why is NICE’s share price tumbling?

The Israeli technology company’s stock price fell on Friday. Nice Systems Ltd. (NASDAQ: nice – good; level:nice – good) fell 7.9% and was down 7.64% on the Tel Aviv Stock Exchange (TASE) today. The sharp drop came after NICE rival Five9 posted financial results and lowered its 2024 revenue guidance, though it raised its non-GAAP earnings forecast.

Five9 said the revenue outlook cut was due to new order trends as well as economic uncertainty. Investors may feel that NICE could also be hurt by these trends. NICE, which provides customer relationship management and risk management solutions, is expected to release its second-quarter results on Thursday, August 15.

But Nice’s share price trend has been negative for some time and is not dependent on this or that financial report. The company’s market value is now $10.6 billion, down about 50% from its peak in mid-November 2021. On the Tel Aviv Stock Exchange, the share price has returned to the price at which it traded more than four years ago.

So the Israeli company with the highest market capitalization on Wall Street in 2022 isn’t even among the top five Israeli companies today. NICE is ranked sixth, behind cybersecurity firm Check Point, Teva Pharmaceuticals (NYSE: TEVA; TASE: TEVA), automotive technology company Mobileye (NASDAQ: MBLY), work operating system company monday.com (NASDAQ: MNDY) and cybersecurity company CyberArk (NASDAQ: CYBR). On the TASE, where NICE was the most valuable company, it now ranks fourth, behind Teva, Bank Hapoalim and Bank Leumi, all of which it has surpassed in recent months.

Veteran CEO resigns without replacement found

One of the major factors weighing on NICE shares in recent months has been uncertainty over the company’s leadership, with veteran CEO Barak Elam announcing three months ago that he would step down at the end of the year (though he will continue to work at the company and help his successor through the first half of 2025). Meanwhile, NICE has yet to announce who will replace him.

Elam, who has spent his entire career with NICE, was appointed CEO a decade ago and has sharpened NICE’s business focus, selling off non-core businesses, acquiring companies and moving into cloud, which has become NICE’s fastest-growing business. During Elam’s decade as CEO, revenue grew 2.5x and non-accounting earnings increased 3.5x, while headcount doubled. Investors appreciated NICE under Elam’s leadership and the stock price surged 360% from his appointment as CEO until he announced he was stepping down, marking a turning point in the stock’s fortunes.

Other factors that have weighed on Nice’s share price recently include the sale of shares in the company by major investor BlackRock, which reported last month that as of the end of June it was no longer a party to Nice’s interests and now owns a 4.3% stake, down from 5.1% in March. Also earlier this year, Microsoft announced the launch of its flagship customer services product, which sent Nice and Five9’s shares tumbling.

In an effort to end the negative momentum and inject market confidence into the stock, Nice announced two months ago that it would accelerate its $300 million share buyback program and launch another $500 million share buyback program. Elam said at the time that the move reflects Nice’s commitment to increasing shareholder value and confidence in the strength of the company’s business.

According to the Wall Street Journal, analysts believe in NICE shares – the average recommendation is “buy” and the average price target is $266, which is 68.8% higher than the current Nasdaq price.

NICE released its second-quarter financial report on Thursday, with the company forecasting revenue of $657 million to $667 million and earnings per share of $2.53 to $2.63. For the full fiscal year 2024, NICE expects revenue of $2.715 billion to $2.735 billion, up 14.6% from last year in the mid-range, and earnings per share of $10.53 to $10.73, up 20.9% from 2023, in the mid-range.

This article was published in Globes, Israeli Business News – en.globes.co.il – on August 11, 2024.

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