Back in early May, LivePerson (NASDAQ:LPSN) stock was on a tear after the AI-powered conversational commerce company reported blowout first quarter earnings which broadly underscored that a pivot toward e-commerce, sparked by the Covid-19 pandemic, had created a surge in demand for the company’s smart chatbot solutions.
At the time, I wrote that LPSN stock was a buy. Not just because of Covid-19 tailwinds. But because the AI-powered conversational commerce megatrend was in its first innings. As that megatrend unfolds over the next decade, LPSN stock will turn into a big winner.
Since then, LivePerson stock has rallied about 20%.
I’m reiterating my original claim today.
LPSN stock is a buy. Both now for Covid-19 tailwinds. And for the next 10 years, thanks to conversational commerce tailwinds.
Here’s a deeper look.
LPSN Stock Rides Covid-19 Tailwinds
The reason to buy LPSN stock today is simple.
The Covid-19 pandemic has significantly accelerated e-commerce adoption globally. In America, for example, e-retail sales rose 25% year-over-year in the second quarter of 2020. That compares to just 15% growth in the first quarter of 2020.
Sure, as non-essential physical stores reopen over the next few months, this tailwind will moderate. But not much. Indeed, even though the physical economy across the U.S. has gradually reopened throughout June and July, JPMorgan‘s (NYSE:JPM) daily credit card data shows that online retail sales trends have only accelerated throughout those two months to post-pandemic highs.
In other words, Covid-19 tailwinds for e-commerce adoption are huge and resilient.
The implication is that, for the foreseeable future, e-commerce adoption will continue to soar. As it does, merchants and retailers will invest big money into upgrading their e-retail platforms. Demand for e-commerce solutions which improve the online selling experience – such as LivePerson’s AI-powered conversational commerce tools, like its smart chatbots – will soar.
So, in the second, third and fourth quarters, it is quite likely that LivePerson reports strong numbers. Those strong numbers will help LPSN stock sustain its current strength.
Long-Term Upside Is Enormous
The reason to hold LPSN stock for the next 10 years is also very simple.
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 robust as physical shopping experiences.
One aspect of e-commerce that’s currently lacking relative to physical shopping is the interpersonal touch. In-store, you can talk to a sales rep and get product and service advice. Doing so online is trickier.
LivePerson’s tools fix this e-commerce shortcoming.
The company leverages AI technology to create online chatbots which replicate in-store sales reps. 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, optimize online sales and broadly improve the online selling experience for the buyer.
Over the next several years, as the e-commerce market evolves and matures, 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.
Bottom Line on LPSN Stock
LivePerson is one of my favorite small-cap technology stocks to buy now and hold for then next five to 10 years.
This is an innovative company, immersed in an explosive e-commerce market. It is powered by secular conversational commerce and AI tailwinds, along with a small revenue base and huge addressable market. Plus, the company has a highly scalable application software oriented business model with huge gross margins.
It doesn’t take a rocket scientist to connect the dots.
LPSN stock is a long-term winner.
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 recognized as one of the best stock pickers in the world 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 did not hold a position in any of the aforementioned securities.