On Friday, Wells Fargo maintained its Overweight rating on LiveRamp Holdings Inc. (NYSE: NYSE:RAMP) and increased the price target to $54 from $50. The adjustment comes after LiveRamp reported a strong fourth fiscal quarter, which exceeded expectations due to increased utilization of data collaboration and clean room solutions by major clients, as well as contributions from Habu, a marketing software company.
The firm's positive outlook for fiscal year 2025 highlights LiveRamp's progress toward achieving the 'rule of 40', a benchmark in the software industry where a company's combined growth rate and profit margin meet or exceed 40%. This is in spite of potential challenges stemming from the delayed deprecation of third-party cookies, which are used for online tracking and advertising.
Wells Fargo's revised financial estimates for LiveRamp in fiscal year 2025 include an increase in revenue to $721 million, up from the previous estimate of $701.1 million. The forecast for non-GAAP operating income and non-GAAP earnings per share (EPS) has also been raised to $127 million and $1.61, respectively, from prior estimates of $126.1 million and $1.58.
The new price target of $54 is based on a 10-year discounted cash flow (DCF) valuation analysis. The analysis incorporates a weighted average cost of capital (WACC) of 9.6%, reflecting a 4.4% risk-free rate, a 4.2% equity risk premium, and a beta of 1.25. Additionally, Wells Fargo considers a 15x terminal multiple to be suitable given the current market conditions.
InvestingPro Insights
As LiveRamp Holdings Inc. (NYSE: RAMP) garners a favorable Overweight rating and a revised price target from Wells Fargo, insights from InvestingPro offer a deeper financial perspective on the company's current standing. With a market capitalization of approximately $2.27 billion, LiveRamp is trading at a high earnings multiple, with a P/E ratio of 215.6. This valuation reflects the high growth expectations set by the market, as well as the company's potential to capitalize on its data collaboration solutions.
InvestingPro data indicates a robust gross profit margin of 72.79% over the last twelve months as of Q4 2024, showcasing the company's ability to maintain profitability in its operations. Moreover, the revenue has grown by 10.57% in the same period, aligning with the positive outlook expressed by Wells Fargo for the fiscal year 2025. LiveRamp's financial health is further emphasized by the fact that it holds more cash than debt on its balance sheet, providing a cushion for strategic maneuvers or unexpected market changes.
For those considering a deeper analysis, InvestingPro offers additional insights, including that three analysts have revised their earnings upwards for the upcoming period, and the company is expected to be profitable this year. With a total of 10 additional InvestingPro Tips available, investors can gain an even more comprehensive understanding of LiveRamp's financial landscape. To access these valuable insights, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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