Exactly a year has passed since the surprise announcement by Barak Eilam, CEO of Israeli technology company Nice (TASE: NICE; Nasdaq: NICE), that he was stepping down. The announcement led to a 15% fall in the company’s share price within two days. Since then, the share price has continued to decline, and in the past twelve months Nice has been the worst performing stock in the Tel Aviv 35 Index list.
In fact, Nice is almost the only stock to have fallen in a period in which the main indices on the Tel Aviv Stock Exchange have reached peak after peak. It is currently traded 30% below its level on the day Eilam announced his departure.
It may be difficult to recall, but, at the end of 2021, Nice reached an all-time high, with a market cap of $20 billion, and at the beginning of 2022 it became the most valuable Israeli company traded on Wall Street, and it looked as though the sky was the limit.
At that time, Eilam said that Nice was in its best ever competitive position, and that its financial profile was unique in the technology sector, combining double-digit revenue growth, high profitability, and large reserves of cash.
Since then, however, the trend has changed. The share price started to decline, and despite some rises along the way, it is now far below its peak.
As mentioned, the sharp fall in the share price came after Eilam (50) announced his resignation after over a decade as CEO. In fact, Nice was the only company at which Eilam worked after the end of his military service as an officer in the 8200 intelligence unit – 25 years in which he grew to the most senior management positions. Under his leadership, Nice became a world leader in its field.
During his time at the company’s helm Eilam became one of the most respected managers in Israel’s technology sector, and certainly one of the best paid. In the period 2014-2024, he received compensation costing a cumulative $150 million, mainly in the form of stock-based compensation.
At the beginning of this year, under its new CEO Scott Russell, the company disappointed investors with the guidance it provided for 2025, and the share price weakened further. Although its performance this year has so far been in line with that of the leading Wall Street indices, over the past twelve month and five-year periods it has underperformed, and the stock has in effect gone backwards more than five years. Today, with a market cap of $10.1 billion – half what it was at the peak – Nice is the seventh most valuable Israeli stock on Wall Street, and in Tel Aviv the major banks have overtaken it.
Eilam’s strategy
Next year, Nice will mark 40 years since it was founded. Seven friends who had served in 8200 founded it, and its first CEO was Didi Arazi. Even while it was still a young company without profits it was floated on the Tel Aviv Stock Exchange in 1991, and later on, in 1996, after it had grown and become profitable, it was floated on Nasdaq as well, raising $20 million.
The share price in the flotation was $10, which is $5 after adjusting for a later share split, and which compares with over $160 today (32 time higher). At the time of the flotation its activity was described as “development of advanced digital equipment to manage voice information and information received by fax,” but in the 2000s Nice entered the field of customer relations management (CRM), in which it specializes to this day. In 2007, it acquired Israeli risk management solutions company Actimize.
For a long time, Nice also had a division that served security and defense customers, but in 2015, shortly after he became CEO (replacing Zeev Bregman), Eilam decided to focus on the core business, and the company sold the security activity in two deals for over $250 million. Those proceeds and the cash generated by its business enabled Nice to buy US company InContact in 2016, which accelerated its cloud business, which is a main focus of its activity today.
AI – opportunity or threat?
So what is weighing on Nice? As mentioned, the company operates in two segments: CRM solutions, and risk management solutions for the financial sector. In his ten years as CEO, Eilam led a strategy of focusing on the core business, acquiring companies, and investing in cloud computing, which generated growth.
Since Eilam was a CEO held in very high regard by investors, his departure aroused concern, but according to Sergey Vastchenok, a senior equity analyst at Oppenheimer Israel, that was not necessarily the main reason for the weakness in the stock. “Many CEOs on Wall Street have stepped down in the past year, and that factor has not always affected the stock. At Cellebrite (Nasdaq: CLBT), for example, the CEO left suddenly, and a replacement has not yet been appointed, but the share price has not been affected very much, because the field in which the company operates is viewed as attractive,” Vastchenok points out.
What is mainly weighing on Nice’s stock, he says, and on other companies in the same field, is the perception that Microsoft is liable to take over the market. “The whole area of UCaaS and CCaaS as a derivative of it (unified communications as a service and contact center as a service, S. H-W.) is perceived by investors as threatened by Microsoft’s Teams,” he says.
“Among Saas companies, the lowest multiples are for companies connected to these fields of cloud communications, such as Nice, Zoom, Verint, and Five9. The perception is that Teams is taking over this space, but in my opinion there’s a misunderstanding here. In CCaaS, managing call centers in the cloud, I don’t think that Microsoft is a real threat, because it’s known for big, generic solutions, and is less successful at vertical solutions for niche markets that require specialization.”
Another fear affecting investor sentiment is the development of artificial intelligence (AI), and here too, the threat Is not specific to Nice but applies to the whole industry. One of the most prominent applications expected in this area is a switch to AI agents that can carry out tasks automatically and are meant eventually to replace call center workers. That is liable to have a negative impact on Nice and similar companies, if pricing is in accordance with the number of workers at the call center, and workers are laid off and replaced by AI. On the other hand, Nice could also benefit from AI, and the company talked about that even before AI became a buzzword, and offered solutions in that area.
“If investors worried about the disruption from AI, the financials show the opposite: AI has expanded the market,” Vastchenok says. In his view, enterprise solutions such as those of Nice cannot be replaced by generic solutions like ChatGPT. “At the enterprise level, you need a lot of surrounding systems and you need integration; that’s Nice’s advantage. AI is developing all the time, and the value of companies is partly measured by the extent to which they adapt themselves to a changing business environment, and the use of AI in their platforms to create more relevant insights.”
The financials, and the upside
Nice will release its quarterly financials this week. As mentioned, when the fourth quarter 2024 financials were published in February, investors were disappointed at the guidance for the year. For the first quarter, the company is expected to present growth of 6% (which compares with double-digit growth in the past), and for 2025 as a whole to present revenue growth of 7% and 10% growth in earnings per share.
Analyst Samad Samana of US investment bank Jefferies said last week that the revenue estimate for the first quarter was reasonable, and that the 12% growth forecast for the cloud business left room for upside, although the uncertainty over tariffs restricted any rise in forecasts in the short term. Samana does not see a downside risk, and believes that the CEO, Russell, will focus on investment in growth. In his view, the company’s management is prepared to forego widening profit margins in order to invest, and he believes that investors will back that strategy, given the strong profit margin profile that Nice has in any case.
Does Nice in its current position represent an investment opportunity? Most analysts believe that it does. According to “The Wall Street Journal”, fourteen analysts are positive on the stock, five are neutral, and none maintains a negative recommendation. The average price target represents a 25.7% premium over the price on Nasdaq.
Jefferies rates Nice a “Hold”. Samana notes that the stock is cheap in terms of the p/e ratio and free cash flow, but says that growth will have to accelerate again or the return on equity will have to rise substantially for the company’s market value to improve.
“Nice is traded at a low multiple versus other SaaS companies, it has plenty of cash, it’s a market leader, and is still growing in the high double digits,” Vastchenok says. “There aren’t many similar SaaS companies. The company is doing good work, the CEO previously managed a division at SAP with 30,000 employees (Nice has 8,700, S. H-W.), and he comes with relevant background and experience. In the end, I, as an analyst, look at the numbers. If Nice is growing faster than Five9 even though the latter is smaller and would be expected to grow faster, it’s a sign that Nice is taking market share because it has a competitive advantage.”
Vastchenok does hedge by saying that it is not clear how long it will take for Nice’s share price to recover, but he points out that in the recent wave of falls because of the US tariffs, Nice fell less than most. “The things weighing on Nice are fully expressed in the price. The 2025 guidance was lower than expected; the company apparently prefers to keep expectations low in order to spring positive surprises.”
Oppenheimer rates Nice “Market perform”, like other companies in its field, but Vastchenok says, “Nice has proved itself as a high quality company, in market leadership, cash flow, financial strength, and growth. Companies like that are capable of coming through a crisis and emerging stronger.”
Published by Globes, Israel business news – en.globes.co.il – on May 11, 2025.
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