StockStory analysts advise caution regarding 8x8, despite the company's stock price climbing to $2.19 over the past six months. The shares have outperformed the S&P 500 by 13.1%, a gain attributed partly to solid quarterly results, yet the firm argues that better investment opportunities exist elsewhere.
The analysis highlights three specific concerns about 8x8's fundamentals. First, the company's billings, a non-GAAP metric often called "cash revenue" that tracks money collected from customers rather than recognized revenue, came in at $188.8 million for the second quarter. Over the last four quarters, year-on-year billings growth averaged 1.3%, a figure StockStory describes as underwhelming. The firm suggests this performance indicates that increasing competition is creating challenges for 8x8 in acquiring and retaining customers.
Second, Wall Street analysts expect 8x8's revenue to rise by 2.6% over the next 12 months. This forecast is close to the company's 5.9% annualized growth rate for the past five years but remains low in absolute terms. StockStory notes that accelerating growth typically boosts valuation multiples and stock prices, while slowing growth has the opposite effect. The firm interprets the modest projection as a sign that 8x8's newer products and services have not yet accelerated top-line performance.
Third, the report examines profitability through the lens of GAAP operating margin, prioritizing this measure over adjusted profits because stock-based compensation is a real expense used to attract and retain talent. While 8x8's operating margin has fluctuated slightly over the last two years, it has generally remained stable. StockStory argues that given the company's revenue growth, its fixed costs should have provided leverage for better economies of scale and higher profitability. The trailing 12-month operating margin stands at 3.1%.
Based on these factors, StockStory concludes that 8x8 does not pass its quality test. Although the stock trades at a forward price-to-sales ratio of 0.4 times, making it appear optically cheap at $2.19 per share, the firm warns that the potential downside is significant due to shaky fundamentals. The analysis directs investors toward other dominant software businesses and lists top growth stocks identified by its AI tool, including Meta, CrowdStrike, and Broadcom, which returned 315%, 314%, and 455% respectively.