LivePerson (NASDAQ:LPSN) stock plunged after the company reported second-quarter earnings. Despite some stellar numbers and a strong revenue outlook for the third quarter, full-year 2021 and full-year 2022, LPSN stock fell.
Basically, the company halved its 2021 EBITDA, as management expects to accelerate its investment into sales and marketing efforts.
Investors who sold LPSN stock on Wednesday are unnecessarily short-sighted, in our humble opinion.
But, on the other hand, this dip presents other investors with a golden buying opportunity, because LivePerson’s business is on fire at the moment.
The company signed another 100-plus deals this quarter, including four deals in the seven-figure range.
Also, messaging volume on its Conversational Cloud platform rose 15%. The number of conversations with artificial intelligence-based (AI) automation rose 40%. Average revenue per customer rose 35%. Total revenues rose over 30%. Lastly, revenue retention rates remained above 115%.
LivePerson recognizes that the moment is ripe for its artificial intelligence messaging platform to gain mainstream adoption.
On the heels of the Covid-19 pandemic, there’s a huge cultural shift toward conversational commerce, as digital shopping adoption and consumer spending are both rising. And this creates a perfect storm, if you will, causing enterprises to increase investment, opting to adopt AI messaging platforms that enable them to build out conversational commerce capabilities.
And LivePerson is bringing on new talent and massively investing in itself by expanding its sales team. It will hopefully win a ton of new contracts and rapidly accelerate revenue growth in the future.
The Bottom Line on LPSN Stock
We think that’s what will happen, and management thinks so too. They issued a guide calling for full-year 2022 revenue growth of at least 27%. Wall Street was sitting around 23%.
We think the actual number will come in somewhere closer to 30%.
This increased revenue base will allow for even more significant operating leverage to kick in with bigger economies of scale down the road.
We see LivePerson earning more EBITDA by 2023 and beyond in our new model, despite the lower EBITDA numbers at present, in 2021 and 2022.
And that is why we believe this selloff to be short-sighted.
With LivePerson, you have a business that’s on fire right now. It’s capitalizing on a momentous opportunity via huge investments, which will weigh on near-term EBITDA but ultimately boost long-term EBITDA — in a big way.
Take the long term approach and buy the dip in LPSN stock.
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On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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