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3 Reasons FIVN is Risky and 1 Stock to Buy Instead

By: StockStory

October 02, 2025 at 00:04 AM EDT

FIVN Cover Image

Over the last six months, Five9’s shares have sunk to $24.01, producing a disappointing 12.6% loss - a stark contrast to the S&P 500’s 18.4% gain. This may have investors wondering how to approach the situation.

Is there a buying opportunity in Five9, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is Five9 Not Exciting?

Despite the more favorable entry price, we're cautious about Five9. Here are three reasons you should be careful with FIVN and a stock we'd rather own.

1. Weak Billings Point to Soft Demand

Billings is a non-GAAP metric that is often called “cash revenue” because it shows how much money the company has collected from customers in a certain period. This is different from revenue, which must be recognized in pieces over the length of a contract.

Five9’s billings came in at $276.5 million in Q2, and over the last four quarters, its year-on-year growth averaged 13.6%. This performance slightly lagged the sector and suggests that increasing competition is causing challenges in acquiring/retaining customers. Five9 Billings

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Five9’s revenue to rise by 8.2%, a deceleration versus its 24.4% annualized growth for the past five years. This projection doesn't excite us and indicates its products and services will see some demand headwinds.

3. Low Gross Margin Reveals Weak Structural Profitability

For software companies like Five9, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

Five9’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 55.3% gross margin over the last year. Said differently, Five9 had to pay a chunky $44.71 to its service providers for every $100 in revenue.

The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Five9 has seen gross margins improve by 2.4 percentage points over the last 2 year, which is solid in the software space.

Final Judgment

Five9’s business quality ultimately falls short of our standards. Following the recent decline, the stock trades at 1.7× forward price-to-sales (or $24.01 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at one of our top software and edge computing picks.

Stocks We Would Buy Instead of Five9

When Trump unveiled his aggressive tariff plan in April 2025, markets tanked as investors feared a full-blown trade war. But those who panicked and sold missed the subsequent rebound that’s already erased most losses.

Don’t let fear keep you from great opportunities and take a look at Top 9 Market-Beating Stocks. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).

Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.

StockStory is growing and hiring equity analyst and marketing roles. Are you a 0 to 1 builder passionate about the markets and AI? See the open roles here.

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