On Wednesday, Direct Digital Holdings Inc. (NASDAQ:DRCT) experienced a change in its stock outlook as Roth/MKM maintained a Buy rating but reduced the price target to $19.00 from the previous $27.50. The adjustment follows the company's fourth-quarter results, which did not meet expectations due to a strategic shift and operational delays.
The company's proactive move away from cookie-based advertising led to a decline in demand during the middle of the fourth quarter. Additionally, new tier-1 publishers faced delays in moving out of beta testing, further impacting the quarter's performance. Despite these setbacks, Direct Digital's forecast for the fiscal year 2024 suggests a year-over-year growth of approximately 15%, albeit at a slower pace than previously anticipated by sell-side analysts.
The anticipated deprecation of third-party cookies is expected to influence the company's growth in the near term. However, the firm anticipates that the onboarding of new tier-1 publishers will positively affect Direct Digital's Supply-Side Platform (SSP) starting in the second quarter and onwards. This is predicted to enable the company to approach a 20% growth rate in the second half of 2024.
The revised price target of $19.00 reflects a more conservative outlook on Direct Digital's growth trajectory, taking into account both the recent underperformance and the potential for recovery as new strategies and partnerships begin to take effect.
InvestingPro Insights
Amidst the adjustments in Direct Digital Holdings Inc.'s (NASDAQ:DRCT) stock outlook, real-time data from InvestingPro provides a clearer picture of the company's financial position. With a market cap of $378.31M and a price-to-earnings (P/E) ratio of 70.07 based on the last twelve months as of Q3 2023, the company's valuation reflects a premium on near-term earnings growth. Despite the high P/E ratio, the company's PEG ratio stands at 0.23, indicating potential value when factoring in expected earnings growth rates.
InvestingPro Tips suggest that analysts are anticipating sales growth in the current year, which aligns with Direct Digital's own forecasts for fiscal year 2024. The company's revenue growth has been impressive, with a 105.32% increase in the last twelve months as of Q3 2023. However, the stock has recently experienced significant price volatility, as seen by a 16.61% drop in the last week. Despite this, the stock has seen a strong return over the last three months, with a 76.97% increase, highlighting the dynamic nature of the stock's performance.
For investors looking for more in-depth analysis and additional InvestingPro Tips, Direct Digital Holdings Inc. offers a comprehensive profile on Investing.com/pro/DRCT. There are more tips available to help guide investment decisions, and by using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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