On Tuesday, Wells Fargo (NYSE:WFC) initiated coverage on LiveRamp Holdings Inc. (NYSE: NYSE:RAMP) with an Equal Weight rating and a price target set at $25.00.
The financial institution cited a slowdown in bookings for the data onboarding company over the last two quarters, attributing the deceleration partly to a softer macroeconomic environment. Additionally, the emergence of indirect competition from platform-specific solutions, such as conversion APIs, has also been impacting the industry.
According to the analyst from Wells Fargo, while LiveRamp may be outperforming its direct competitor, Neustar, the overall growth of the data onboarding industry seems to be hindered by these new, lower-cost data solutions.
The analyst's commentary pointed out that the software macroeconomic factors are indeed influencing LiveRamp's recent bookings results, which showed a year-over-year increase of 35% in the third fiscal quarter of 2024, but only an 8% increase in the first fiscal quarter of 2024.
Wells Fargo's report suggests that despite LiveRamp's potential market share gains against Neustar, the broader industry challenges are likely to persist. The firm forecasts a 6% subscription revenue growth for LiveRamp in the fiscal year 2026, which is 4% below the consensus estimate. This projection is based on the current trends and competitive dynamics observed within the data onboarding sector.
The coverage initiation and the price target by Wells Fargo reflect a cautious outlook on LiveRamp's financial performance in the coming years. The Equal Weight rating indicates that the firm views the stock as fairly valued at its current price, considering the risks and opportunities that lie ahead.
In other recent news, LiveRamp Holdings Inc. has reported robust financial results for the first quarter of Fiscal 2025, surpassing market expectations with double-digit growth in revenue and annual recurring revenue (ARR).
The company's Q1 financial performance included revenue reaching $176 million and an operating income of $27 million. LiveRamp's Data Marketplace segment saw a growth of 23%, reflecting the trend in the US digital advertising market. The company also revised its revenue guidance for FY'25 upwards, now expecting between $715 million and $735 million.
Furthermore, LiveRamp has increased its share repurchase authorization from $1.1 billion to $1.3 billion, extending the program's expiration to December 31, 2026. The company has bought back $35 million worth of stock in the current fiscal year, including $19 million during the ongoing fiscal second quarter. The repurchase strategy remains adaptable to market conditions, share price, and capital availability.
According to Benchmark, a financial analysis firm, despite a slight reduction in LiveRamp's fiscal year 2026 subscription revenue forecast, the firm maintains a positive outlook on LiveRamp, citing its leading position in identity resolution and data clean room services.
These are the most recent developments in the company's ongoing efforts to promote data collaboration and standardize terms of service and query templates with digital publishers.
InvestingPro Insights
To complement Wells Fargo's analysis, InvestingPro data offers additional insights into LiveRamp's financial position. Despite the challenges highlighted in the article, LiveRamp's revenue growth remains positive, with a 12.02% increase over the last twelve months. This aligns with an InvestingPro Tip indicating that net income is expected to grow this year.
However, investors should note that LiveRamp is trading at a high earnings multiple, with a P/E ratio of 278.89. This valuation metric suggests that the market may be pricing in significant future growth, which could be challenging given the industry headwinds mentioned in the article.
On a positive note, LiveRamp holds more cash than debt on its balance sheet, providing financial flexibility as it navigates the competitive landscape. This strength is particularly relevant given the softer macroeconomic environment and increased competition from platform-specific solutions mentioned in the Wells Fargo report.
For readers interested in a more comprehensive analysis, InvestingPro offers 7 additional tips for LiveRamp, providing a deeper understanding of the company's financial health and market position.
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