Analyst Note| Dan Romanoff, CPA |
Our $252 fair value estimate is unchanged after no-moat Zoom announced that it was terminating its $14.7 billion merger agreement for Five9. This is not entirely surprising after the Sept. 17 news that Institutional Shareholder Services recommended to Five9 shareholders that they vote against the merger coupled with the announcement several days later that the Department of Justice was investigating the acquisition. We view this as unfortunate, as the acquisition would have expanded the portfolio while deepening switching costs and creating cross-selling opportunities. We suspect that the company will continue to pursue smaller deals but believe national security issues will creep up again in larger transactions. Shares have been volatile, topping out at a whopping $568 nearly a year ago, but have since retreated to the point where we view them as fairly valued.