On Friday, Needham increased the price target for Shutterstock (NYSE:SSTK) shares to $65 from $60, while maintaining a Buy rating for the stock. The adjustment follows Shutterstock's announcement of raised organic guidance for the first quarter and the acquisition of Envato, which was revealed on Thursday.
The firm cited Shutterstock's Digital Design Services (DDS) segment as a significant contributor to the positive outlook, noting that it exceeded expectations due to robust performance across all three products. This success has led Needham to revise its near and medium-term estimates for Shutterstock, now projecting figures above the company's own 2027 targets.
Despite a second consecutive quarter of 10% year-over-year decline in content revenue, Shutterstock's management expressed confidence in reversing this trend and achieving growth, which Needham anticipates will occur in the fourth quarter.
The firm acknowledged the concerns about the potential impact of generative AI on the industry but suggested that the DDS segment's strong performance, along with the opportunities presented by generative AI, support a compelling narrative for Shutterstock's future.
The acquisition of Envato is also seen as accretive to Shutterstock's business, bolstering the company's offerings in the market. Needham's commentary reflects optimism that Shutterstock's strategic moves and segment performances will validate their investment thesis and mitigate the perceived threats from generative AI technologies.
InvestingPro Insights
Shutterstock (NYSE:SSTK) has been the subject of recent positive revisions by analysts, and the latest data from InvestingPro reinforces the company's strong financial position. With a market capitalization of $1.48 billion and a P/E ratio that has adjusted to 15.28 for the last twelve months as of Q4 2023, Shutterstock presents a compelling valuation, especially considering its PEG ratio of 0.3, which suggests potential for growth relative to earnings.
InvestingPro Tips highlight that Shutterstock holds more cash than debt on its balance sheet and has a history of raising its dividend, with a 25% dividend growth in the last twelve months. Moreover, the company has been profitable over the past year, with a return on assets of 11.5%, and analysts predict it will remain profitable this year. For investors looking for additional insights, there are 7 more InvestingPro Tips available, which can be accessed by visiting https://www.investing.com/pro/SSTK.
For those interested in further in-depth analysis and exclusive content, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. Shutterstock's next earnings date is set for May 2, 2024, which will provide further insights into the company's performance and the impact of its strategic initiatives, including the acquisition of Envato.
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