Bofa bearish on DoubleVerify stock amid lower guidance

EditorEmilio Ghigini
Published 05/10/2024, 04:26 AM
DV
-

On Thursday, DoubleVerify Holdings Inc (NYSE:DV) stock experienced a significant shift in its outlook. BofA Securities has downgraded the digital media measurement company from Buy to Underperform, simultaneously lowering the price target to $18 from the previous $45. The revised price target reflects a substantial decrease from the firm's earlier valuation of the company.

The downgrade was prompted by a combination of factors that have altered the investment firm's perception of DoubleVerify's prospects. The analyst cited a predominantly long positioning and challenges in justifying the company's long-term growth expectations as primary reasons for the change in rating. Additionally, the absence of bullish catalysts has contributed to the revision.

Another point of concern for the analyst was the inconsistency in DoubleVerify's year-over-year growth guidance, which has been adjusted downward to 17% from 22%. This adjustment, according to the analyst, does not align with the characteristics of a company that can sustainably grow more than 20% over the long term.

The new price objective of $18 is based on making DoubleVerify's enterprise value to EBITDA multiple consistent with that of its peer, Integral Ad Science (IAS), prior to IAS's fourth-quarter results. At that time, IAS had higher growth expectations, which were more in line with the now-adjusted expectations for DoubleVerify.

Lastly, the analyst expressed concerns about market structure risks associated with DoubleVerify's intra-day market capitalization of $3 billion. The revised valuation and downgrade reflect a more cautious stance on the company's financial performance and market position.

InvestingPro Insights

Amidst the recent downgrade by BofA Securities, DoubleVerify Holdings Inc (NYSE:DV) presents a mixed financial picture according to real-time data and InvestingPro Tips. With a market capitalization of $3.23 billion, the company is trading at a high P/E ratio of 80.68, which is substantial even after adjusting for the last twelve months as of Q1 2024, with a P/E of 48.49. Despite these valuations, DoubleVerify boasts an impressive gross profit margin of 81.5%, which indicates strong profitability on its core offerings.

InvestingPro Tips highlight that DoubleVerify holds more cash than debt, which is a positive sign of financial health and liquidity. Moreover, the stock is currently in oversold territory based on the RSI, which could signal a potential rebound. However, it's worth noting that 5 analysts have revised their earnings estimates downwards for the upcoming period, which could reflect the concerns raised by BofA Securities regarding the company's growth prospects.

Investors looking for further insights and tips on DoubleVerify can find them on InvestingPro, which offers an additional 20 tips for the company. For those considering a subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.