Why is Five9 (NASDAQ:FIVN) so mispriced?
We’ll never know exactly, because the insights producing the disparity of today’s price with those in the near future being protected against come from sources limited to the research of professionals with full-time dedication to such evaluative tasks. The disparities are also aided by daily evolutions of Market-Maker [MM] awareness of the conditioning of attitudes indicated by their institutional clients’ transactions. Usually referred to as “order flow”, such insights rarely get beyond the market-making community itself.
But those prospects are evidenced by hedging actions in derivative securities, which have the advantage of being impossible to misinterpret in terms of their outcomes. Our analysis of their actions has been performed daily (without meaningful change) for two decades in this century, and weekly for another two decades in the 20th century. Each security’s report contains what has happened to all of that issue’s prior forecasts in the past 5 years having the same Reward~Risk balance as the current one. Warts and all.
For more about the MMs’ forecasts, check “How To Use Market Maker Hedging-Derived Price Forecasts“.
Value and beauty are in the eyes of beholders. What institutional investment beholders cause market-makers to put at risk, and then protect, is shown for FIVN and a few other competitors in Figure 1. The implications of what coming share prices would mean if the future mimics 182 prior FIVN market-day forecasts out of the last five years is suggested in columns [F] through [R] of the top row.
Forecasts must live in the real, uncertain world. We reflect that by observing only 153 of the 182 priors (84%) [H] were profitable. The 29 errors could have had worst possible actual experience outcomes of -7.9% [F]. Assigning the +13.1% net gains to the 84% and the -7.9% to the remaining 16% of outcomes [O] and [P] leaves an odds-weighted net gain of+9.7%. [Q]
In the same holding period of the prior 182 experiences, 43 market days [J], or about 2 months, the basis points (1/100th of a percent) per day of 22.7 equals a CAGR of +77%.
This is only a next-3-months outlook, but a +13.1% gain in 43 days held in the past has been a +104% annual rate, so when FIVN gets to $75.50, take the money and run. If it hasn’t got there by June 20, my apologies, cash the position out to be employed in a better opportunity.
As can be seen by the bottom row of the table, there usually are several other odds-on productive alternatives. The long-run perspective for portfolios needing prompt performance to support lengthy retirement needs is to repeat outstanding short-term capital gain achievements.
Five9, Inc. appears to be a competitive capital gain buy prospect with good odds for an attractive near-term payoff.
Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in FIVN over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Disclaimer: Peter Way and generations of the Way Family are long-term providers of perspective information, earlier helping professional investors and now individual investors, discriminate between wealth-building opportunities in individual stocks and ETFs. We do not manage money for others outside of the family but do provide pro bono consulting for a limited number of not-for-profit organizations.
We firmly believe investors need to maintain skin in their game by actively initiating commitment choices of capital and time investments in their personal portfolios. So, our information presents for D-I-Y investor guidance what the arguably best-informed professional investors are thinking. Their insights, revealed through their own self-protective hedging actions, tell what they believe is most likely to happen to the prices of specific issues in coming weeks and months. Evidences of how such prior forecasts have worked out are routinely provided in the SA blog of my name.