Nice Earnings: Industry-Leading Cloud Growth Continues; Shares Undervalued

Narrow-moat Nice NICE delivered generally solid first-quarter results, beating the FactSet consensus and the high end of management guidance on revenue and EPS. Furthermore, cloud revenue growth remained strong at 25% year over year with the cloud gross margin increasing 140 basis points to 70%, both slightly ahead of our estimates. Guidance for the full year was also increased slightly. Despite these seemingly positive results, the market was less enthused with shares closing down nearly 6% on the day. Regardless, we don’t see anything that would alter our long-term thesis, and our 2023 estimates remain within the new guidance range. Consequently, we don’t expect to make a material change to our $280 fair value estimate. At current levels, the shares look significantly undervalued.

Guidance for the second quarter included non-GAAP total revenue of $573 million-$583 million (9% growth at midpoint) and non-GAAP fully diluted EPS of $2.00-$2.10 (10% growth at midpoint). For the full year, guidance is now for non-GAAP total revenue of $2.35 billion-$2.37 billion (8% growth at midpoint) and non-GAAP fully diluted EPS of $8.32-$8.52 (11% growth at midpoint).