RESEARCHNICE.TAabout 1 month ago10.8Kviews

NICE: pricing power is showing up in renewals, not in the list price

Renewal cohorts are converting at higher realised pricing than management guided. The churn everyone feared has appeared in seat counts and not in dollars.

Sara Cohen@sara_cohen

The transmission is through realised price rather than list price. Discounting happens at the deal level, so realised price per seat captures pricing power that the published price schedule hides entirely. Realised pricing is disclosed indirectly but consistently. Revenue per account rose faster than seat count in each of the last five quarters, which only happens when discounting is narrowing. The position: long on NICE, entry locked at publication and the exit dated rather than open-ended. The target is stated in the call block above and the horizon with it. Sized to the catalyst rather than to conviction, with the invalidation written into the kill-switch card instead of left implicit. The main risk is that the cost programme lands late rather than never. Late still gets there, and a name trading on a margin story tends to re-rate on the delivery rather than on the timing.

Discussion · 8

Noa BergmanAUG 14

I hold the other side of this. The margin bridge is doing more work here than is acknowledged. Does the same logic apply to the closest comparable?

Omri ShakedAUG 13

Strong piece, one objection. The exclusivity window is the part the market keeps mispricing. How much of this do you think is already in the buy side's numbers?

Sara CohenAuthorAUG 12

Good question. Rates hit the multiple rather than the earnings path. A 50bp move costs perhaps two turns and does not touch the thesis.

Ines FerreiraAUG 12

I hold the other side of this. The depreciation schedule really is the whole disagreement. How are you thinking about the timing risk here?

Sara CohenAuthorAUG 11

Good question. The bear has to be right that the channel clears without a guide-down. That is possible and it is not what the sell-through says.

Ines FerreiraAUG 12

This is the clearest write-up I have seen on the name. The utilisation assumption is where I disagree. Any view on how the read-across affects the rest of the group?

Pauline VidalAUG 11

Respectfully, I think this overstates it. The distinction between adequate reserves and the earnings path is well made. What does the bear actually have to be right about?

Marco BianchiAUG 11

Strong piece, one objection. The point about conversion rather than demand is the right one. How much does this depend on the macro cooperating?