Friday - Benchmark has adjusted its stock price target on Smith Micro Software (NASDAQ:SMSI), reducing it to $8 from the previous $20 while maintaining a Buy rating on the stock. The revision follows Smith Micro's earnings release and guidance provided yesterday after the market closed for the first quarter of 2024 and the outlook for the second quarter.
The analyst from Benchmark cited several reasons for the target adjustment, including a reassessment of the equity hurdle rate for Smith Micro, which takes into account past execution challenges that the company has faced. These challenges were partly attributed to external factors, such as Verizon (NYSE:VZ)'s decision to switch to an in-house family safety solution.
Another factor influencing the new stock price target is the 1-for-8 reverse stock split that Smith Micro underwent on April 8, 2024. Moreover, the analyst noted minor impacts from the company's recent financial results, which were largely as expected, except for a $24 million goodwill impairment.
Despite the significant reduction in the stock price target and the recent pullback in Smith Micro's stock, Benchmark remains optimistic about the company's prospects. The firm believes that family safety remains a critical service for mobile carriers and anticipates that Smith Micro, with its superior product offerings, will experience substantial growth. The analyst projects that the company will return to actual or near positive EBITDA by the fourth quarter of 2024.
InvestingPro Insights
In light of Benchmark's revised price target for Smith Micro Software (NASDAQ:SMSI), real-time data from InvestingPro shows a market capitalization of $22.47 million USD. The company's Price / Book multiple stands at a low 0.49 as of the last twelve months leading up to Q1 2024, indicating potential undervaluation relative to its assets. Still, this comes against a backdrop of significant sales decline, with revenue shrinking by 23.5% over the same period.
Two notable InvestingPro Tips for SMSI investors to consider include the fact that the company holds more cash than debt on its balance sheet, which could provide some financial stability, and that liquid assets exceed short-term obligations, suggesting the company has a buffer to cover immediate liabilities. Nonetheless, analysts do not anticipate SMSI will be profitable this year, and the stock has experienced high price volatility, with a 78.17% drop in the one-year price total return as of the end of March 2024.
For those looking to delve deeper into Smith Micro Software's financial health and future prospects, InvestingPro offers a comprehensive suite of additional tips. There are 11 more InvestingPro Tips available, which can provide further guidance on the company's valuation and performance. To explore these insights, investors can visit https://www.investing.com/pro/SMSI. Use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription to InvestingPro, where you can access exclusive data and analytics to inform your investment decisions.
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