YB new stock pitches (Thu, Aug 28)

Five9 (FIVN), a leading cloud contact center software provider, trades at just 2x ARR compared to private competitor Genesys at 7-9x ARR despite similar financial profiles, creating a compelling valuation opportunity with 70% upside potential to a 9x 2026 EBITDA target. The company recently reported strong Q2 results including 16% subscription revenue growth reacceleration, significant gross and operating margin expansion, tripled AI bookings, and raised guidance across the board, while trading at all-time low multiples of 2.7x EV/Gross Profit and 7.5x EBITDA. CEO Mike Burkland's announced retirement may signal an M&A window for interested strategic acquirers or private equity firms like Thoma Bravo, while activist investor Anson Funds (which took a board seat in December) has implemented significant cost cuts similar to their successful Twilio playbook. Bull cases include Five9's deep enterprise IT integration through APIs with partners like ServiceNow and Salesforce, a $24 billion addressable market with 60% still migrating from on-premise to cloud, AI adoption driving growth and margin expansion, and potential M&A catalyst. Bear cases center on the narrative that AI poses an existential threat to the contact center ecosystem and concerns that recent CEO retirement combined with cost cuts signals operational turmoil, while the $1.5 billion Salesforce/ServiceNow investment in Genesys raised fears about diminished M&A prospects, though the investment actually highlights the strategic value of CCaaS software and the public/private valuation disconnect.

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CareCloud (CCLD), a Revenue Cycle Management provider that helps U.S. healthcare providers collect payments, trades at 5.7x EV/EBITDA compared to peers at 17x despite having solved its previous constraints that limited growth. The company has freed up $8M in annual cash flow by converting preferred shares that paid 9% dividends, built a complete technology stack through acquisitions of CareCloud Corporation, Meridian Medical Management, and medSR, and developed a 3,700-person Pakistan-based team (including 700 in software and 500 in AI) that operates at 85% lower cost than U.S. teams. CareCloud's growth strategy involves buying struggling RCMs at 1-2x revenue multiples, cutting their costs by 40-60% within 3-6 months, and earning 30-40% returns on investment, with some deals requiring no money down and 100% of purchase price based on future revenue generation. The outsourced RCM market has grown 12% annually for the past decade with 1,500-2,000 small struggling RCMs available for acquisition, while 23% of healthcare businesses still don't outsource despite 90% wanting to, creating a large consolidation opportunity that favors mid-sized buyers like CareCloud. The stock appears cheap due to share count increasing from 16M to 42M shares after preferred conversion (causing the stock to drop from $3.00 to $1.60), revenue decline from hospital exits and reduced consulting work (though core TEBS business with $74M revenue and $27M EBITDA remains strong), and bundled reporting that obscures TEBS profitability. By end of 2025, CareCloud expects to have $20M cash enabling $15M revenue acquisitions, potentially adding $6M-10M EBITDA and lifting total 2026 EBITDA to $33M-37M, with further growth potentially reaching $39-47M EBITDA and $20-27M free cash flow against today's $100M market cap.

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Boston Omaha Corporation (BOC), trading at $13.10 with a $412 million market cap, is a holding company operating in bonds, billboards, and broadband that has achieved a 27% revenue CAGR since 2018, growing from $20 million to $108 million in 2024, with management targeting a 25% IRR and 5-7% organic growth while CEO Adam Peterson owns 23% and actively buys shares. The company's $100 million investment in Sky Harbour Group (SKYH) creates volatility, with BOC holding 11.6 million shares worth $123 million and warrants worth approximately $15 million, meaning the core businesses can be valued at $274 million of the total market cap. The billboard business has generated a 22% IRR since 2018 with $6.9 million net income plus $10 million additional free cash flow, the surety bond business achieved just above 20% IRR despite 2022 losses from interest rate spikes, and the broadband segment focuses on newly constructed residential developments with 10-year HOA contracts plus 5-10 year options, though faces competition risk from Starlink potentially reaching cost parity by 2030. Trading at 10x adjusted EBITDA and 0.75x estimated tangible book value, the company has a price target of $22.13 by 2027 (68% upside) assuming maintenance of current growth rates and a 3x price-to-sales ratio, with key risks including Starlink competition for broadband and the timing of the SKYH exit.

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