28 Feb Should you buy LivePerson on the Dip?
LivePerson, Inc. (NASDAQ: LPSN) offers conversational artificial intelligence solutions for enterprise and consumer segments in the United States, Canada, Latin America, South America, Europe, the Middle East, Africa, and the Asia-Pacific region. The Company’s Curiously Human AI combines Natural Language Understanding (NLU), Natural Language Processing (NLP) and machine learning to create human-like interactions.
LivePerson, Inc. (NASDAQ: LPSN)
Market Cap: $1.32B; Current Share Price: 18.10 USD
Data by YCharts
We take a holistic look at the Company through a SWOT analysis below:
SWOT Analysis
Strength
LivePerson Inc is leveraging a combination of AI and machine learning, to deliver a comprehensive conversational experience across channels, for customers across multiple platforms including social, email, voice and messaging. The Company’s product suite consists of a conversational cloud, which is built on data from nearly 1 billion conversational interactions each month, delivering a more accurate customer experience than any competitor. The result is improved employee efficiency, 10 times more conversions, enhanced customer experience and decreased agent attrition rates.
Image Source: Company
The Conversational cloud also offers ad-on features such as advanced AI and analytics that enable brands to monitor the performance of contact center operations and improve conversion rates. The proactive messaging feature allows companies to send outbound messages through various channels for high-value marketing and creating deeper engagement. Additional features include security and compliance, multi-language support and multi-channel deployment.
The Company offers corporate COVID-testing, health check and vaccination reporting through BELLA Health. The application offers features like in-app health check, easy-to-understand instructions and tracking dashboards facilitating the maintenance of corporate health and safety protocols.
LivePerson clients include leading brands such as Virgin Atlantic, IBM, HSBC, RBS and Lancome Paris and other Fortune 500 companies including internet service providers, online merchants, automotive dealers, small businesses, government and not-for-profit organizations.
The Company’s revenue for full year 2021 grew by 8% to $469.6 million, while revenue for Q4,2021 revenue was $123.8 million, a 21% increase YoY. The Company also reported a 44% YoY growth in automated messaging across its customer base. The Company has signed 107 deals in total including 7 seven-figure deals and added 27 new customers and extended 80 existing customer contracts.
SaaS (Software-as-a-service) is making inroads and revolutionizing the idea of how business is conducted. According to a report by Fortune business insights, the global SaaS market size is expected to reach $716.52 billion by 2028, growing at a CAGR of 27.5% from $130.69 billion in 2021. The Company recognizes the shift in the manner in which customers prefer to interact with brands today, with a clear preference for text-based interactions over over-the-phone conversations. The products and services of the Company are well poised to cater to this growing need.
Opportunity
Artificial Intelligence is witnessing burgeoning demand and gaining wide scale acceptance owing to the humongous amount of data being generated by new age organizations. There is a growing need for tools that enable advanced data interpretation, and offer valuable insights, that can be used for serving both internal as well as external customers better. According to a report by Markets and Markets, the artificial intelligence as a service market is expected to reach USD 10.88 Billion by 2023, growing at a CAGR of 48.2%, from USD 1.13 Billion in 2017.
Innovative AI powered solutions are making their way into the service industry, to address the demand for software tools and services that use machine learning, deep learning, and natural language processing [NLP]. The application of these novel solutions is to be found in various industries such as agriculture, manufacturing, banking, transportation, healthcare, insurance, telecommunication and defense and government functioning. The emergence of Application Programming Interface (API) and Software Development Kit (SDK) and growing number of innovative startups will propel the growth in the industry according to the report.
AI powered service solutions can create better customer experiences as they eliminate the need for long wait times, human errors and the solutions offered are mostly preemptive and quick in nature. This can help improve customer loyalty and brand reputation as well. In fact the conversational AI market size is estimated to be worth over USD 15.7 billion by 2024, growing at a CAGR of 30.2%, from USD 4.2 billion in 2019 according to a report.
However, as the adoption of AI is still in its nascent stage, the prohibitive costs of design, implementation and customization as well government and regulatory hurdles may hamper the growth in the market and act an impediment for the industry from reaching its full potential.
Weakness
The adoption of Artificial Intelligence is still at its nascent stage, with Companies facing multiple challenges such as insufficient or incorrect data, lack of skilled manpower, difficulty identifying appropriate use cases for the implementation of this technology in their organization. The cases where data is available, there are issues of processing bias leading to generation of faulty hypotheses and incorrect models.
Integration is another major challenge as Companies struggle with incorporating AI into already existing systems. The introduction of AI in some cases needs overhaul of existing data infrastructure such as data storage, realignment of data and re-training and testing and creation of a feedback loop to ensure that the systems are working fine, all of which are deemed time-consuming, cumbersome and costly.
As per the Company’s fourth quarter of 2021 results net loss was $49.9 million or $0.70 per share, as compared to a net loss of $13.3 million or $0.20 per share for the same period in 2020. The Company will now be focusing on generating revenues rather than gaining new customers, indicating a shift in their growth strategy. The management expects the sales for Q1,2022 to land at approximately $125 million, an increase of 16%, while the revenue for the full year 2022 are expected to be $560 million as against wall street expectations of $600 million.
Live Person is also likely to be affected by the increasing return of employees to workspaces as the pandemic is abating, which will have an impact on its growth and earnings in the coming days.
Threat
Technology is a constantly evolving field. A breakthrough innovation of today can easily become outdated in a matter of years. To sustain in such a highly competitive environment, companies need to constantly be one step ahead of the competitors in research and development and delivering highly differentiated experiences for their customers. There is a possibility of a new and better technology emerging in the market, which may render the Company’s technology obsolete. Customers may opt to go with its competitors for their business needs and the Company may fail to acquire new customers or not be able to achieve its targeted growth.
The Company faces stiff competition from competitors like Intercom, User like, Zendesk Support, LifeChat, Drift and Freshdesk among others.
Conclusion
The Company is investing in technology and strategic acquisitions to keep ahead of competitors. In October 2012, Live Person acquired Voice Base, a company dealing in real-time speech recognition and conversational analytics and Tenfold, a leading customer engagement platform to create a unified, AI-enabled system for customer experience.
In July 2021, the Company had acquired e-bot7, a German conversational AI company, which would help brands to quickly launch AI-powered messaging experiences, while gaining a stronghold in Europe.
The Company has faced a series of rating downgrades, for instance, Needham has cut the rating to “Hold” from “Buy”, while JP Morgan has revised their rating from “Overweight” to “Neutral”. The stock has also been downgraded by Roth Capital from “Buy” to “Neutral” and William Blair from “Outperform” to “Market Platform”.
However, a shift in growth strategy, slowing growth and the return of employees to workspace may weigh on the Company’s prospects in the coming days.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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References
https://www.liveperson.com/products/conversational-cloud
https://ir.liveperson.com/static-files/00a417f5-bd1d-4a27-a4ca-e6a76dbcba35
https://finance.yahoo.com/news/liveperson-announces-fourth-quarter-2021-212200841.html
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