Why NiCE Stock Crumbled Today

Stock market investors weren't kind to NiCE (NASDAQ: NICE) on Tuesday. Following several analyst price target cuts on the software-as-a-service (SaaS) company's American Depositary Receipts (ADRs), the value of its equity declined by nearly 13% during that trading session. That was a notably steeper decline than the 0.8% fall of the S&P 500 index.

The claws come out

Those bearish moves came on the heels of NiCE's latest Capital Markets Day, held on Monday. By my count, six prognosticators tracking the company reduced their fair value assessments.

Among this half-dozen was Elizabeth Porter of the ever-influential investment bank Morgan Stanley. She lowered her price target to $160 per share from the preceding $193, although she maintained her overweight (buy, in other words) recommendation on the stock.

According to reports, Porter implied that NiCE's strategy of assertively ramping up artificial intelligence (AI) capabilities to power its offerings is a smart one. However, she feels that the increased investment required for this will negatively affect the company's margins and free cash flow (FCF) in the proximate future.

The not-so-NiCE view

NiCE is something of a survivor in the tech field and has cleverly decided to focus on promising niche areas, chiefly call center automation. I don't feel that it has an unassailable position in this or its other segments, though. Also, investors are becoming increasingly wary of companies plunging deeply into AI (which is an expensive endeavor). I'd probably give NiCE stock a miss these days.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends NiCE. The Motley Fool has a disclosure policy.