Needham has maintained its Buy rating on Shutterstock (NYSE: NYSE:SSTK) but lowered the price target to $55 from the previous $65.
The adjustment, which came on Wednesday, was attributed to reduced revenue projections for the company's Content division, as well as a slight decrease in DDS revenue expectations.
The analyst from Needham highlighted that the key factor for Shutterstock's stock performance is the future of its Content revenue. The ability to halt declines in this area and return to growth is seen as crucial.
The timeline for this recovery in Content revenue has been extended once more in the recent quarter, which has led to a downward revision of financial estimates and has put pressure on the stock's value.
Despite the reduction in the price target, Needham's stance remains positive due to what they perceive as an attractive risk-reward balance. The firm notes that Shutterstock's management is capitalizing on the current undervalued stock by repurchasing shares.
The analyst expressed confidence in the stock's potential for recovery, citing low valuation levels and the growth prospects within the company's DDS segment as reasons for maintaining a Buy rating.
Shutterstock reported a notable increase in its second-quarter revenue, marking a 5.4% year-over-year growth to $220 million. This growth was primarily fueled by its Data, Distribution, and Services business, which saw a significant surge of 129%. However, the Content business experienced a 9% decline in revenue, falling to $170 million.
The company recently made strategic acquisitions, including that of Envato, projected to enhance the Content business and add an estimated $75 million to revenues by 2024. Alongside this, Shutterstock also unveiled its GenAI 3D capabilities and a new partnership with Databricks, indicating a focus on technological advancements.
InvestingPro Insights
Shutterstock's (NYSE: SSTK) financial health and market performance have been a focal point for investors, especially following Needham's recent price target adjustment. An analysis of real-time data from InvestingPro reveals several key metrics that support the firm's optimistic stance despite recent challenges. Shutterstock's P/E ratio stands at a competitive 28.99, with an adjusted P/E ratio for the last twelve months as of Q2 2024 at an even more attractive 19.14, indicating potential undervaluation relative to near-term earnings growth.
InvestingPro Tips for Shutterstock underscore the company's robust financial position, highlighting that it holds more cash than debt on its balance sheet and has demonstrated a commitment to returning value to shareholders by raising its dividend for 4 consecutive years. Moreover, the company's cash flows can sufficiently cover interest payments, which is a testament to its financial prudence. For investors looking for additional insights, InvestingPro offers numerous other tips, including predictions on profitability and stock performance metrics.
From a shareholder value perspective, Shutterstock's dividend yield stands at an appealing 3.27%, with a notable dividend growth rate of 11.11% over the last twelve months as of Q2 2024. These figures, coupled with the fact that the company has been profitable over the same period, provide a compelling narrative for investors considering the stock's future prospects. As the market anticipates Shutterstock's next earnings date on October 22, 2024, the InvestingPro platform lists several more tips that can offer a deeper understanding of the company's potential.
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