On Monday, BofA Securities updated its outlook on Doximity Inc (NYSE:DOCS), a professional medical network, raising the price target to $45 from the previous $32 while maintaining a Neutral rating on the stock. The adjustment comes after the firm conducted its tenth survey on advertising spend, which reflected a significant improvement compared to previous surveys.
The recent survey included feedback from 35 respondents, with a focus on the top 20 pharmaceutical companies, which made up 57% of the total participants. The findings indicated a noticeable uptick in both overall and digital advertising budgets. The Doximity platform, in particular, was identified as a primary beneficiary of increased manufacturer spending.
The analyst from BofA Securities noted that the results from this quarter's survey were notably stronger than those from past surveys. The positive data led to the conclusion that Doximity is well-positioned to maintain double-digit revenue growth, and possibly exceed it if the trends observed continue to hold.
The firm's raised revenue growth estimates are based on the strong survey results. However, the analyst also pointed out that while the positive survey is encouraging, it does not yet establish a definitive trend. Despite the increase in the price objective to $45, which now reflects 29 times the calendar year 2025 estimated EBITDA (up from 20 times), the Neutral rating was reiterated.
This decision was influenced by the substantial increase in the stock's multiple since early August, which, according to the analyst, suggests that the current valuation already accounts for the more optimistic outlook.
InvestingPro Insights
Doximity's recent performance aligns with the positive outlook presented in BofA Securities' survey. InvestingPro data shows that Doximity's revenue growth for the last twelve months as of Q1 2023 was 12.99%, with a quarterly growth of 16.79% in Q1 2023, supporting the analyst's projection of sustained double-digit revenue growth.
The company's strong financial position is further evidenced by two key InvestingPro Tips. Firstly, Doximity "holds more cash than debt on its balance sheet," indicating financial stability. Secondly, the company boasts "impressive gross profit margins," which is reflected in the InvestingPro data showing a gross profit margin of 89.65% for the last twelve months as of Q1 2023.
These insights complement BofA Securities' analysis, suggesting that Doximity is well-positioned to capitalize on increased advertising spend in the pharmaceutical sector. For investors seeking a deeper understanding of Doximity's potential, InvestingPro offers 16 additional tips that could provide valuable context for investment decisions.
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