8×8: Spot indications of a bottom for this software stock (NASDAQ:EGHT) | Wbactive

Khanchit Khirisutchalual

Software stocks just don’t seem to be gaining traction. It’s one of the niches of the market that has slipped below the June lows and shows consistent relative weakness versus the S&P 500.

A little software has struggled with FX headwinds, but I see evidence for optimism in 8×8.

Software stock slump

Software stock slump


According to Bank of America Global Research, 8×8 (NASDAQ:EGHT) provides a cloud-based business communication and collaboration solution on a unified platform that spans voice, video, contact center and desktops, replacing outdated and expensive on-premise systems. It is delivered as an application that follows the user regardless of the device (desk phone, smartphone, desktop, tablet). Features include voice, video, conferencing, integration with CRMs and recent expansion in communication platform APIs.

The California-based software industry company with a market capitalization of $476 million in the information technology sector has no positive trailing 12-month GAAP results and therefore does not pay a dividend The Wall Street Journal.

The stock has a high short interest of 18.8%. It continued to recover earlier this week as well takeover chatter, but stocks have remained confined to a current range. beat EGHT too earnings estimates in its latest quarterly report, published on October 27. So, despite the terrible year-over-year performance, there are some bullish headlines out there for the small software stock.

8×8 is a strong Unified Communications as a Service (UCaas) and Contact Center as a Service (CCaaS) company via its cloud platform, targeting midsize businesses. Of course, this is a niche that has been mistreated by investors over the past year as lending rates have risen.

An uncertain general direction from the management team, as evidenced by the lowered forecasts in the latest earnings report, is downside risks. Still, operating income is expected to turn positive, and free cash flow is already positive.

Downside risks include issues as EGHT attempts to climb higher and increased competition puts pressure on margins. The company’s services are also prone to cutbacks from companies looking to lower their operating expenses. Upside potential includes better efficiencies and strategic execution.

Valuation-wise, BofA analysts expect non-GAAP earnings per share to rise sharply in the coming years. However, reported GAAP earnings should remain in the red. Bloomberg consensus forecast is slightly weaker than BofA expected. Dividends are not expected to be paid from this high-growth company, but its FCF yield is impressive. The EV/EBITDA multiple is also appropriate for this A+ rated growth company. The forward PEG ratio is high, near 4.0, while the price-to-sales ratio is looking good at 0.63. Overall, the evaluation picture is mixed.

8×8: Earnings, Valuation and Free Cash Flow Forecasts

8x8: Earnings, Valuation and Free Cash Flow Forecasts

BofA Global Research

Looking ahead, corporate events data provided by Wall Street Horizon shows an unconfirmed earnings date for the third quarter of 2023 on Wednesday, February 1st. Before that, however, the company is expected to speak at two industry conferences. That Well Fargo6th Annual TMT Summit 2022 takes place from November 28th to December 1st. Then Barclays Global Technology, Media and Telecoms Conference takes place on December 7th and 8th. Industry-changing news could be shared at these events.

Events calendar for companies

Events calendar for companies

Wall Street Horizon

The technical recording

EGHT bottomed below $3 per share in mid-October after peaking in early 2021 with so many long duration stocks. After falling more than 90%, it might be tempting to nibble on stocks now. I see a reasonable technical reason for this. Take a look at how the stock rallied from the last decade’s low, but then stalled at a key downtrend support line. If EGHT can break above this line, it would trigger a bullish price target near $7 – right where the falling 200-day moving average comes into play, as well as a key break point from last June.

Also, momentum is decreasing, which helps confirm the stock’s bullish move. I would like to see stocks hold the uptrend line from the October low. Overall, this stock has bullish technical potential, but we’ll have to wait for the breakout.

EGHT: Stocks are consolidating after a major downtrend, improving RSI and watching $5

EGHT: Stocks are consolidating after a major downtrend, improving RSI and watching $5


The final result

With forward turnover of just 0.6 and positive free cash flow, I think the stock is basically worth a look here. Technically we’re not quite there yet, but the chart also suggests that an uptrend could be in the works.

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