On Wednesday, JMP Securities updated its outlook on DoubleVerify (NYSE: NYSE:DV) shares , reducing the price target to $34 from the previous $40, while maintaining a Market Outperform rating.
This adjustment follows DoubleVerify's first-quarter earnings report for 2024, during which the company also revised its full-year guidance downward by $27 million.
The company anticipates that its second-quarter growth will be around 15% year-over-year at the midpoint, with the expectation that the current weakness will extend into the third quarter of 2024.
According to JMP Securities, the reduced outlook is largely due to the continuation of the first quarter's trends, where volatile advertising spending by a few advertisers was observed.
Despite the lowered revenue forecasts and the associated challenges, JMP Securities advocates for the purchase of DoubleVerify shares during any market dips. The firm's stance is based on the ongoing demand for services related to ad fraud and brand safety.
Moreover, the analyst highlighted the potential in the partnership with Meta (NASDAQ:META), which is anticipated to accelerate and could substantially enhance DoubleVerify's profitability, especially if growth rates were to decelerate.
At the close of after-hours trading, DoubleVerify's stock was priced at $19.18, which JMP Securities notes implies a valuation of 12.6 times the company's projected 2025 EBITDA.
The firm believes that the market has excessively undervalued DoubleVerify, considering the current trading price. Despite the downward adjustment in the price target, JMP Securities reaffirms its positive outlook on DoubleVerify's stock.
InvestingPro Insights
In light of JMP Securities' recent analysis of DoubleVerify, InvestingPro data reveals a nuanced picture of the company's financial health. The market cap of DoubleVerify stands at a robust $5.25 billion, and the firm boasts a high gross profit margin of 81.38% over the last twelve months as of Q4 2023. This impressive margin underscores the company's ability to manage its cost of goods sold effectively and is a testament to its operational efficiency.
However, investors should be aware of DoubleVerify's high earnings multiple, with a P/E ratio of 71.43 and an adjusted P/E ratio of 73.4 for the same period. This indicates that the company's stock is trading at a premium relative to its earnings. Additionally, the PEG ratio, which measures the stock's price relative to its earnings growth, stands at 1.15, suggesting that the stock may be priced fairly in relation to its expected growth.
DoubleVerify's financial robustness is further highlighted by two InvestingPro Tips: the company holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. These indicators suggest a solid financial foundation, with sufficient liquidity to meet its immediate financial obligations. Moreover, there are 11 additional InvestingPro Tips available that can provide further insights into DoubleVerify's financial health and prospects. To explore these tips and gain a deeper understanding of DoubleVerify, visit https://www.investing.com/pro/DV and use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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