The good financial results published last week by NICE Systems Ltd. (Nasdaq: NICE; TASE: NICE) have propelled the company's share price over $100 for the first time and boosted its market cap to $6 billion.
CEO Barak Eilam has managed NICE Systems for the past four years, leading strategic measures aimed at focusing the company on the civilian market and abandoning activity in the defense market, while bolstering activity in cloud computing, NICE Systems' growth engine, in which the company's first quarter growth was 31.9%.
NICE Systems has made five acquisitions in recent years as part of this strategy at an aggregate cost of $1.2 billion. The largest of them was InContact, acquired in 2016. NICE Systems recently announced the yet-to-be-completed acquisition of Mattersight. Senior NICE Systems executives will undoubtedly provide further particulars about the company's strategy at its investors' conference tomorrow in Florida.
NICE Systems, founded in 1986 and listed on Nasdaq since 1996, provides solutions for management of customer relations and risks. When Eilam became CEO in April 2014, the company's share was trading at $41-42, compared with an all-time high of $47 in 2000 (prices adjusted for dividends distributed).
The share price has more than doubled since then. In the summons to NICE Systems' shareholders' meeting, the shareholders were asked to support a 20% increase to $750,000 in Eilam's base salary. The explanation given was that since Eilam's appointment, the company's strategic focus has changed significantly. Among other things, the company mentioned the 141% increase in its market cap, an 84% rise in its operating profit margin, and a 41% increase in revenue (as of the beginning of April).
"The changes in the company have in effect made Eilam the CEO of a much larger enterprise: from 3,400 employees in 2013 to 5,200 employees in 2017," the invitation to the shareholders' meeting stated. The cost of Eilam's salary in 2017 was $6.3 million.
No one recommends selling NICE Systems' shares
The analysts covering NICE Systems are divided between those who regard the share positively and those who are neutral. Not a single analyst recommends selling the share. At the same time, it appears that the current share price is high enough for them; looking ahead, they see no major upside. The average target price for the share is $103, only 3.3% higher than the current market price.
For example, Barclays gives a $100 target price for NICE Systems' share, after raising it from $93 following last week's financial statements. Analyst Tavy Rosner wrote that the company had outperformed the analysts' forecasts, and mentioned that NICE Systems' CXone cloud platform was gaining momentum in the market. He believes that the acquisition of Mattersight will improve the company's analytics capabilities. Barclays nevertheless retained its "Market perform" recommendation for the share.
The highest target price for NICE Systems' share among the analysts, $115, a 15% premium on the current market price, came from Oppenheimer, which raised its target price for the share from $100 following publication of NICE Systems' financial results. Analysts Shaul Eyal and Hugh Cunningham wrote that growth in sales of CXone had accelerated and that NICE Systems had greatly improved the time between receiving a customer's order and making the system fully operational for the customer.
Cramer enthusiastic about cloud computing growth
In his appearance last week on Jim Cramer's popular "Mad Money" program on CNBC, Eilam succeeded in arousing the enthusiasm of Cramer, who said, "These guys are doing something very different. It's very exciting."
It appears that what especially stirred Cramer was the growth in cloud computing, about which Eilam said, "The beauty of our cloud story is that we are not cannibalizing our own base. We actually use cloud in order to grow our total addressable market fivefold."
Published by Globes [online], Israel business news - www.globes-online.com - on May 14, 2018
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