On Tuesday, Direct Digital Holdings Inc. (NASDAQ:DRCT) saw its price target adjusted by Roth/MKM, with the new target set at $7.50, a significant decrease from the previous $19.00. Despite this change, the firm maintains a Buy rating on the company's stock.
Direct Digital recently announced the appointment of BDO as its new auditor, a move that is expected to address previous concerns related to revenue recognition from publishers. The appointment is seen as a strategic step towards addressing audit issues that have been a point of concern.
The company's financial statements for the fiscal year 2023 are set to be audited by BDO. This process is necessary for the filing of Direct Digital's delayed first quarter 2024 Form 10-Q. The timeline for this audit is anticipated to coincide with the second quarter 2024 filing deadlines, which are expected to occur in mid-August.
The engagement of BDO is seen as a critical move for Direct Digital, as it aids in the company's efforts to meet Nasdaq's listing requirements. If all goes as planned, the company could potentially satisfy these requirements by mid-August, which would be a positive development for its stock market listing.
In light of these developments, Roth/MKM has set the revised price target for Direct Digital at $7.50, down from the previous $19.00. The firm's continued endorsement of a Buy rating indicates its belief in the company's value proposition despite the lowered price target.
In other recent news, Direct Digital Holdings reported a 76% increase in total revenue for 2023, reaching $157.1 million, and an adjusted EBITDA of $11.3 million, up by 11%. Despite challenges such as lower demand in the fourth quarter and a decrease in gross profit margin due to higher costs, the company projects a revenue increase to between $170 million and $190 million for fiscal year 2024.
The company recently appointed BDO USA, P.C. as its new independent registered public accounting firm, replacing Marcum LLP. This decision underscores Direct Digital Holdings' commitment to robust financial practices.
In analyst news, both Roth/MKM and Benchmark maintained a Buy rating for the company, despite reducing the price target due to the company's recent fourth-quarter results. These adjustments were made following a strategic shift and operational delays within the company.
Direct Digital Holdings also received a non-compliance notice from Nasdaq due to a delay in filing its Annual Report for the fiscal year ended December 31, 2023. The company is actively working to complete the audit of its financial statements and aims to file the Annual Report promptly to regain compliance.
InvestingPro Insights
Direct Digital Holdings Inc. (NASDAQ:DRCT) has been navigating a challenging period, with the recent price target adjustment by Roth/MKM to $7.50 reflecting the market's recalibration of expectations. An analysis of real-time data and InvestingPro Tips reveals additional context that may be pertinent to investors considering the company's prospects.
InvestingPro data shows that Direct Digital has a market capitalization of $37.88 million and a Price to Earnings (P/E) ratio of 17.48, based on the last twelve months as of Q4 2023. The company's revenue growth was impressive at 75.82% during the same period, which could be indicative of underlying business strength despite the recent stock price volatility. Moreover, Direct Digital's stock has seen a significant return over the last week, with a 19.46% price total return, which may catch the eye of investors looking for short-term movements.
Still, it is essential to note that the stock has experienced considerable price declines over the last three months and six months, with total returns of -88.04% and -75.78% respectively. This volatility is supported by one of the InvestingPro Tips, which points out that the stock generally trades with high price volatility. The company's gross profit margins are on the weaker side at 23.92%, which could be a concern for profitability going forward. Despite these challenges, Direct Digital's liquid assets exceed its short-term obligations, suggesting a degree of financial stability.
For those interested in deeper analysis, there are additional InvestingPro Tips available, providing further insights into Direct Digital's performance and valuation. To access these tips and enhance your investment strategy, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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