LivePerson Stock Sees An All-Time High Due To Call Center Disruptions

LivePerson’s stock (NASDAQ: LPSN) has rallied 170% since 23rd March (vs. about 53% for the S&P 500) to its current level around $50. This is after falling to $18 on 23rd March, as a rapid increase in the number of Covid-19 cases outside China spooked investors, and resulted in heightened fears of an imminent global economic downturn. The stock is currently above its February 2020 price of $33. Are the gains warranted or are investors getting ahead of themselves? We believe that the stock recovery is justified, but the stock has limited upside in the near term. Why is that? LivePerson develops conversational commerce and AI software. Its stock price recovered post Q1 2020 and Q2 2020 results with sales increasing by 18% y-o-y and 29% y-o-y, respectively. This increase was primarily seen as call centers remained closed due to lockdown orders. In the first 6 months they saw a total of 264 deals with 107 being new client sign ups. Conversation volumes increased more than 40% since the pandemic began in March as they benefited from work from home orders. The market seems to have factored this in, as the stock recently reached an all-time high. We also have a detailed comparison of LivePerson’s stock performance during the current crisis with that during the 2008 recession in our dashboard analysis.

How Did LivePerson Fare During 2008 Downturn?

We see LPSN’s stock declined from levels of around $6 in October 2007 (the pre-crisis peak) to roughly $2 in March 2009 (as the markets bottomed out) – implying that the stock lost as much as 67% of its value from its approximate pre-crisis peak. This marked a drop that was bigger than the broader S&P, which fell by about 51%.

Further, LPSN’s stock rose steadily post the 2008 crisis to about $7 in early 2010 – rising by about 267% between March 2009 and January 2010, as against the S&P which bounced back by about 48% over the same period.

In comparison, LPSN’s stock lost 45% of its value between 19th February and 23rd March 2020, and has already recovered 176% since then. The S&P in comparison fell by about 34% and rebounded by about 53%.

Is The Recovery Warranted & Can We Expect Further Gains?

The rally across industries over recent months can primarily be attributed to the Fed stimulus which largely quieted investor concerns about the near-term survival of companies. The flattening of Covid cases in the worst hit U.S. and European cities is also giving investors confidence that developed markets have put the worst of the pandemic behind them.

LivePerson’s revenues saw a steady growth in the first quarter and second quarter of the year. The company benefited from the closing of call centers due to the pandemic and saw a high demand for their messaging and AI services.

Over the coming weeks, we expect continued improvement in demand and subdued growth in the number of new Covid-19 cases in the U.S. to boost market expectations. Following the Fed stimulus — which helped set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view, with investors focusing their attention on 2021 results.

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