Small-cap technology company LivePerson (NASDAQ:LPSN) burst out of obscurity and onto the scene in early May 2020 after the conversational commerce company reported strong first quarter numbers, causing LPSN stock to pop more than 40% in a day.
And that rally was just the cherry on top for a clear winner of the novel coronavirus pandemic. From mid-March lows, LivePerson stock is now up 140%.
Make no mistake. LivePerson is, in some ways, benefiting from Covid-19 shifting the economic landscape. But there’s more to the spike than the ongoing pandemic.
This is a high-quality growth company, aligned with the AI-powered conversational commerce mega-trend. LPSN has significant long-term upside potential that’s being largely overlooked by the market today.
In other words, LivePerson stock isn’t just a stock to own during the pandemic. It’s one the best growth stocks to buy for the next 10 years.
More Than a Coronavirus Stock
Yes, LivePerson is winning big right now because of Covid-19.
Amid physical store closures, buyers and sellers are both pivoting online. LivePerson provides AI-powered tools which enable online commerce through digital conversations. Consequently, demand for LivePerson’s AI-powered conversational commerce tools is exploding higher at the current moment.
The company reported 10% deal volume growth in the first quarter, and 18% revenue growth.
But LivePerson is also much more than just a “coronavirus winner”. This is a high-quality growth company with huge secular tailwinds.
Zooming out, conversational commerce is the next big breakthrough in the e-commerce revolution. Consumption is increasingly shifting online. As it does, retailers will have to invest in making their online shopping experiences as good as possible. One aspect of e-commerce that’s currently lacking is the interpersonal touch. In-store, you can talk to a sales rep and get product/service advice, but doing so online is trickier.
LivePerson’s tools fix this shortcoming. The company leverages AI technology to create online chatbots which replicate an in-store sales rep. These chatbots appear on company websites, in messaging apps, and pretty much everywhere else that operates on text-based communication online. These chatbots’ goal is to help convert consumer interest into action and optimize online sales.
Over the next several years, as the e-commerce market evolves, more and more retailers will invest in building out digital conversational commerce channels. Many of these retailers will turn to LivePerson to help them power their conversational commerce initiatives. And LivePerson’s revenue, profits and stock price will all soar.
Huge Potential for LivePerson Stock
When I say “soar” with respect to LPSN stock, I mean soar.
Revenues at LivePerson this year are projected to be around $355 million. That would be up more than 20% year-over-year. In 2019, revenues rose 17%. In 2018, they rose 14%.
With LivePerson, then, you have a company that is accelerating its revenue growth trajectory — a testament to the idea that conversational commerce tailwinds are only getting stronger as the e-retail market matures.
Those tailwinds will only keep getting stronger. Into 2024, the conversational AI market is projected to grow by 30% per year, powered mostly by increased usage of smart chatbots like the ones LivePerson makes.
Even further, LivePerson pegs its addressable market as measuring $60 billion. At $355 million in 2020 revenues, LivePerson is tapping into less than 1% of its addressable revenue opportunity.
Connecting the dots, LivePerson is a growth company with a lot of momentum, increasing market tailwinds and a huge forward opportunity. Oh, and LivePerson operates as a highly scalable software business with 70%-plus gross margins, so not only will revenues roar higher over the next few years, but big revenue growth will power big profit growth, too.
How big are we talking?
I think $6 in earnings per share is possible by fiscal 2025. Based on an technology sector-average 20-times forward earnings multiple, that implies a 2029 potential price target for LPSN stock of $120 — about quadruple today’s price.
Bottom Line on LPSN Stock
In the world of small-cap growth stocks, LivePerson stock is about as good as they come.
This is a high-quality growth company. Aligned with the conversational commerce megatrend. With an accelerating revenue growth trajectory. And strengthening market tailwinds. And big gross margins. Tapping into less than 1% of its addressable market.
Sound like a potential multi-bagger over the next few years? It is.
As such, I think LPSN stock is worth adding to every investor’s long-term growth portfolio.
Luke Lango is a Markets Analyst for InvestorPlace. He has been professionally analyzing stocks for several years, previously working at various hedge funds and currently running his own investment fund in San Diego. A Caltech graduate, Luke has consistently been rated one of the world’s top stock pickers by various other analysts and platforms, and has developed a reputation for leveraging his technology background to identify growth stocks that deliver outstanding returns. Luke is also the founder of Fantastic, a social discovery company backed by an LA-based internet venture firm. As of this writing, he may initiate a long position in LPSN within the next 72 hours.