Why this Cheap Tech Stock is a Strong Buy Right Now
Zacks Investment Research | Sep 21, 2020 07:41AM ET
Shares of eGain (NASDAQ:EGAN) EGAN have jumped over 65% in 2020 to easily outpace the larger technology sector’s 20% climb. The customer engagement solutions firm topped our earnings estimate in early September and its outlook appears strong within an economy that becomes more digitally-focused every day.
Digital Age Support…
EGain’s suite of over 20 apps helps its clients provide digital-first customer engagement in an omnichannel world where businesses must be present on as many different platforms as possible, from websites and social media to email and everywhere in between.
Consumers and customers have come to expect prompt answers to questions and real-time solutions wherever and whenever. The Sunnyvale, California-based firm enables its clients, which span from financial services and government entities to retail and hospitality, to meet these needs. On top of virtual assistants, messaging, and more, the company offers various analytics tools.
The customer engagement solutions firm saw its fourth quarter fiscal 2020 revenue jump 13%, with its SaaS revenue up 34% for the period ended on June 30. Meanwhile, eGain’s adjusted earnings surged from $0.02 per share in the year-ago period to $0.08, which topped our estimate by 15%.
EGAN’s fiscal 2020 sales climbed 8% to $72.7 million, with its SaaS unit up 27% to account for nearly 80% of total revenue. This growth came on top of last year’s 10% revenue expansion and highlights the strength, importance, and resilience of its business during the economic downturn. “While the short-term economic outlook is uncertain, given the COVID-19 pandemic, we are bullish thanks to accelerating demand for digital customer engagement and our product leadership,” eGain’s CEO Ashu Roy said in prepared remarks on September 2.
Other Fundamentals…
EGAN stock has soared 430% in the past three years to easily top its industry’s 50% climb, as the nearby chart showcases. More recently, the firm’s shares have jumped 60% in the past 12 months, compared to the Software Services market’s 30% average.
EGAN closed regular trading Monday at $13.29 per share, down about 8% off its recent 52-week highs. Despite the recent dip, the stock remains well above its 50-day moving average. And even though it has outpaced its industry, eGain has consistently traded at a discount over the last several years. EGAN is trading at 5.2X forward 12-month sales at the moment vs. its industry’s 6.9X average.
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EGAN also boasts a “B” grade for Growth and an “A” for Momentum in our Style Scores system. More importantly, eGain’s consensus earnings estimates have skyrocketed since its last report, with its FY21 projection up 186% and FY22 up 214% since its early September release.
Zacks estimates call for eGain’s Q1 FY21 revenue to jump 10%. Looking further down the road, EGAN’s fiscal 2021 sales are projected to jump over 9% to nearly $80 million, with FY22 expected to come in another 12.2% higher.
Bottom Line
Clearly, volatility might remain in the near-term and the upcoming election presents many unknowns. Nonetheless, the recent earnings revisions activity helps eGain grab a Zacks Rank #1 (Strong Buy) at the moment.
In the end, investors with a long-term outlook might want to consider taking a chance on the omnichannel customer engagement solutions provider that’s projected to grow at a steady pace over the next several years.
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With users in 180 countries and soaring revenues, it’s set to thrive on remote working long after the pandemic ends. No wonder it recently offered a stunning $600 million stock buy-back plan.
The sky’s the limit for this emerging tech giant. And the earlier you get in, the greater your potential gain.
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