On Monday, Truist Securities revised its price target for NerdWallet Inc (NASDAQ: NRDS), reducing it to $16.00 from the previous $19.00, while still holding a Buy rating on the stock. The adjustment follows the company's recent challenges with changes in Google (NASDAQ:GOOGL)'s algorithms, which have impacted its organic traffic.
As a result, NerdWallet has increased its performance marketing spending to compensate for the traffic loss, adversely affecting its margins.
The firm acknowledged the difficulties NerdWallet is facing but remains positive about the company's future. Despite the setbacks, Truist Securities highlighted the strong performance in the Insurance sector and the efforts to right-size the cost structure as immediate steps to protect margins in the near term.
Additionally, the potential for rate cuts later in the year and the possibility of more lenient underwriting policies were cited as factors that could benefit NerdWallet.
NerdWallet's second-quarter results were reportedly on target regarding revenue but fell short of consensus estimates for adjusted EBITDA. The third-quarter guidance for 2024 suggests higher anticipated revenue but also forecasts lower adjusted EBITDA than expected. Truist Securities' revised price target reflects these recent financial outcomes and the ongoing strategic adjustments the company is making in response to external challenges.
The firm's analyst pointed out that while it may take time for NerdWallet to fully adapt to the recent Google algorithm changes, there are several reasons to remain optimistic about the stock. These include the aforementioned insurance segment outperformance and proactive cost management strategies.
In summarizing the firm's stance, the analyst stated, "We see the outperformance in Insurance, the rightsizing of the cost structure to protect margins NT, prospects for rate cuts later this year/loosening of underwriting policies, and valuation as reasons to remain constructive on NRDS." Despite the reduction in the price target, Truist Securities' outlook for NerdWallet remains positive with a continued Buy rating.
InvestingPro Insights
In light of the recent adjustments by Truist Securities, a glance at real-time data from InvestingPro reveals a nuanced picture of NerdWallet Inc (NASDAQ: NRDS). The company's market cap stands at approximately $887.82 million, which, when paired with a negative P/E ratio of -78.55, underscores the challenges the company faces in the near term. However, an InvestingPro Tip suggests that net income is expected to grow this year, offering a silver lining amidst the current financial landscape.
Moreover, the stock's recent performance indicates a significant downturn, with a one-week price total return of -29.32%. This aligns with another InvestingPro Tip indicating that the stock is currently in oversold territory. For investors considering NerdWallet's potential for recovery, the company's liquid assets exceeding short-term obligations could provide some reassurance of its financial resilience.
For those seeking a deeper dive into NerdWallet's prospects, InvestingPro offers additional insights, including 8 more InvestingPro Tips, which can be accessed for NRDS at InvestingPro. These tips could offer valuable guidance for investors navigating the company's stock performance and future profitability outlook.
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