On Thursday, JPMorgan (NYSE:JPM) shifted its perspective on Doximity Inc (NYSE:DOCS) stock, upgrading from Underweight to Neutral and setting a price target of $25.00. The change in rating comes as the analyst believes there is no significant downside left to the company's valuation. Doximity's shares have experienced a decline of 29% since February 2023 and 15% since third-quarter earnings were reported.
JPMorgan's assessment indicates that the industry's growth rate, which is expected to remain similar to that of 2023 at 5-7%, should provide a stable base for Doximity's financial year 2025 (FY25). Current market expectations, which project a 10% year-over-year growth for FY25, have been deemed adequately conservative, especially since no new material headwinds have been identified by the company.
The analyst points out that Doximity has consistently outperformed the market growth rate by an average of approximately 85% since 2021. If this trend continues alongside the industry's underlying growth, it could suggest a 9-15% growth rate for Doximity in FY25, aligning with the previous fiscal year's growth.
Doximity is anticipated to meet or exceed Wall Street's revenue and EBITDA estimates for FY25 when it releases guidance in May during its fourth-quarter earnings report. While the lack of key performance indicators (KPIs) in Doximity's model presents challenges for financial forecasting, the company's robust financial profile, characterized by nearly 50% margins and low-double-digit revenue growth, supports the analyst's neutral stance.
Despite the company's premium valuation compared to the median of the Healthcare Information Technology (HCIT) sector, JPMorgan acknowledges Doximity's strong financials. With a score of 58 on the rule of 40 basis, which balances growth and profit margins, the analyst believes that Doximity's performance justifies a premium valuation when considering its EBITDA growth.
InvestingPro Insights
Following JPMorgan's neutral stance on Doximity Inc, a deeper dive into the company's financial health and stock performance using InvestingPro data can provide additional context for investors. Doximity's impressive gross profit margin, which stands at a robust 88.94% for the last twelve months as of Q3 2024, underscores the company's efficiency in generating income relative to its costs. Moreover, the company's ability to manage its financial obligations is evident, as its liquid assets exceed short-term obligations, indicating a strong liquidity position.
InvestingPro Tips suggest that Doximity's management has been actively involved in returning value to shareholders through share buybacks, which can be a positive signal regarding the company's future prospects and management's confidence in the stock. Additionally, analysts predict the company will be profitable this year, aligning with JPMorgan's expectations for Doximity to meet or exceed revenue and EBITDA estimates for FY25. With a market capitalization of $4.46 billion and a P/E ratio of 33.35, investors are pricing in the company's growth potential.
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