On Thursday, Citi revised its stance on Gannett Co., Inc. (NYSE:GCI), moving the rating from Sell to Neutral, while also increasing the price target to $3.60, up from the previous $1.95. The adjustment was prompted by notable improvements in the company's digital segment revenue trends.
The analyst from Citi highlighted the stronger revenue trends within Gannett's digital segment as the primary reason for the upgrade. These positive developments are expected to contribute to the company's revenue growth by 2025. The analyst's optimism about Gannett's future financial performance is based on this anticipated growth.
In response to the upgraded revenue outlook, Citi has also adjusted its target enterprise value to EBITDA (EV-EBITDA) multiple for Gannett. The multiple has been raised from approximately 4.5 times to about 5.0 times. This change in the valuation metric is a direct reflection of the more favorable revenue projections.
The new price target of $3.60 represents a significant increase from the previous target of $1.95. This revised target is based on the revised EV-EBITDA multiple and the expectation of revenue growth in the coming years.
InvestingPro Insights
Following Citi's upgraded outlook on Gannett Co., Inc. (NYSE:GCI), real-time data from InvestingPro provides a nuanced perspective on the company's financials. With a market capitalization of $479.87 million, Gannett's positioning in the market is clear. Despite a negative P/E ratio of -3.92, which indicates investor concerns over profitability, the PEG ratio of 0.05 suggests that the company's earnings growth potential is being recognized at a value. Additionally, a price to book ratio of 2.06 aligns with industry norms, reflecting a potentially fair market valuation relative to the company's book value.
The digital segment's revenue trends, which spurred Citi's rating change, are part of a broader financial landscape where Gannett's revenue in the last twelve months as of Q1 2024 stands at $2.63 billion, despite a decline of 8.23% over the period. This contraction in revenue is mirrored in the quarterly figure, with a 4.96% drop in Q1 2024. However, Gannett's gross profit margin remains robust at 36.73%, indicating a strong ability to control costs relative to revenue.
For investors seeking further insights, InvestingPro offers additional tips that can help analyze Gannett's financial health and investment potential. Currently, there are 15 more InvestingPro Tips available, providing a deeper dive into the company's performance metrics. For those interested in leveraging these insights, use coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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