On Monday, Evercore ISI began coverage on Doximity Inc (NYSE:DOCS), a digital platform for medical professionals, assigning an In Line rating and setting a stock price target of $30.00.
The firm addressed concerns regarding the company's growth and deferred revenue accounting, noting the shortening duration of deferred revenues and a decrease in the portion of revenues coming from deferred revenue, which stood at 50% in the third quarter of 2024.
The analysis by Evercore ISI acknowledges that while the trend of recognizing a greater amount of the prior deferred revenue balance as revenue in the subsequent quarter may not enhance overall revenue visibility, it does serve to alleviate some concerns about aggressive accounting practices.
The firm also pointed out that there has been an increase in business within the quarter, which is not ideal for visibility but counters worries about the company's revenue recognition methods.
Despite the first year-over-year decline in deferred revenues in the third quarter of 2024, Evercore ISI suggests that it may be too soon to draw conclusions about a downturn in growth. The firm believes that while the current data does not indicate a positive trend, making any extrapolations at this stage could be considered premature. However, they recommend ongoing observation of the company's financials.
Evercore ISI's commentary includes an analysis of a short report that indicated a potential long-duration decline in deferred revenues in the fourth quarter of 2022 and the first quarter of 2023 after adjustments. The firm, however, regards the conclusions drawn in the short report as potentially overstated.
In summary, Evercore ISI has initiated coverage on Doximity with a neutral stance, setting a price target of $30.00. The firm's analysis calls for continued monitoring of Doximity's financials, particularly its deferred revenue accounting, before making any definitive statements about the company's growth trajectory.
InvestingPro Insights
The latest data from InvestingPro shows that Doximity Inc (NYSE:DOCS) holds a market capitalization of $4.93 billion, reflecting the size and scale of the company within the digital healthcare sector.
With a high gross profit margin of 88.94% over the last twelve months as of Q3 2024, the company demonstrates significant efficiency in its operations and the ability to retain a large portion of its revenue as profit. Moreover, Doximity has experienced a revenue growth of 16.58% during the same period, indicating a robust expansion in its business activities.
InvestingPro Tips for Doximity reveal that the management's aggressive share buyback strategy and the company's ability to hold more cash than debt on its balance sheet are positive indicators of financial health and management confidence.
Moreover, analysts predict the company will be profitable this year, which is corroborated by the fact that Doximity has been profitable over the last twelve months. These factors could be particularly relevant for investors considering the recent concerns about the company's growth and deferred revenue accounting highlighted by Evercore ISI.
For those interested in deeper analysis and additional insights, InvestingPro provides a total of 12 InvestingPro Tips for Doximity, which could help investors make more informed decisions. To access these insights, consider using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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