Tuesday, B.Riley increased the price target for EverQuote (NASDAQ: NASDAQ:EVER) shares to $36.50, up from $29.50, while maintaining a Buy rating on the stock.
The firm's decision came after EverQuote announced a second-quarter performance that surpassed expectations and provided an optimistic third-quarter forecast, indicating a faster-than-anticipated recovery in the auto insurance sector.
EverQuote's revenue for the second quarter went beyond the midpoint of its guidance by approximately 14%, and the midpoint of the third-quarter revenue guidance was about 42% higher than the prior consensus estimate.
This surge was driven by a robust recovery in auto insurance, which saw a quarter-over-quarter increase of 32% and a year-over-year rise of 106%. The firm noted that an increasing number of insurance carriers are boosting budgets and reactivating campaigns in response to historically favorable underwriting profitability conditions.
The revenue growth also translated into significant operating leverage, with EverQuote reporting record numbers for adjusted EBITDA, net income, and free cash flow in the second quarter. This performance was notably better than competitors LendingTree and MediaAlpha, which reported more modest earnings.
EverQuote's streamlined cost structure contributed to an 11% adjusted EBITDA margin in the second quarter, surpassing B.Riley's expectation of 7.9% and setting a sustainable trend for the second half of 2024 and into 2025.
B.Riley also highlighted the potential for additional revenue growth in 2025, as some carriers have yet to increase their spending significantly. Moreover, markets in certain states like California and New York, which have faced challenges, are expected to rebound in 2025.
Taking these factors into account, B.Riley has raised its full-year 2024 and 2025 estimates for EverQuote. The new price target is based on a forward-looking EV/adjusted EBITDA multiple of approximately 20 times for the fiscal year 2025, which is a downward revision from the previous multiple of around 27 times, reflecting a compression in peer multiples in recent months.
The firm's positive outlook on EverQuote precedes the upcoming fourth-quarter earnings report from QuinStreet, another company with a Buy rating from B.Riley, which is set to release its results on August 8, 2024.
In other recent news, EverQuote has been making headlines with its strong financial performance and promising growth prospects. Analysts from Craig-Hallum and Canaccord Genuity have both raised their stock price targets for the company, maintaining a Buy rating. EverQuote's robust first quarter results, surpassing key financial metrics, were a significant factor in these adjustments.
The company's success has been attributed to a recovery in auto insurance spending, with revenues, Variable Marketing Margin (VMM), and adjusted EBITDA all exceeding estimates. EverQuote reported a record net income, adjusted EBITDA, and operating cash flow in the first quarter.
The company's management anticipates a multi-year recovery phase in the Auto segment, with an adjusted EBITDA margin expected to maintain around or above pre-downturn levels of approximately 6%.
EverQuote's significant upward revision for its second-quarter outlook indicates a larger trend of sustained growth and profit gains. Both Craig-Hallum and Canaccord Genuity analysts have expressed confidence in the company's recovery and its potential for growth. The development of an independent agent channel and investments in the platform are expected to contribute to this upward trajectory.
These are recent developments that reflect EverQuote's strong start to the year and its positive outlook for the upcoming quarters. The company's record revenue, secured record EBITDA, and the projection of sustained growth indicate a promising future for EverQuote.
InvestingPro Insights
EverQuote's recent performance and B.Riley's upgraded price target are underpinned by several key metrics and insights from InvestingPro. With a market capitalization of $832.02 million, EverQuote is trading at a high Price / Book multiple of 9.42, reflecting investor confidence in its assets and growth potential. Despite a revenue decline of 33.01% over the last twelve months as of Q1 2024, the company boasts a remarkable gross profit margin of 91.95%, underscoring its ability to maintain profitability in its core operations.
InvestingPro Tips highlight the company's strong liquidity position, with liquid assets surpassing short-term obligations and a cash balance that exceeds debt. This financial stability is essential for navigating the competitive insurance marketplace. However, it's worth noting that EverQuote is not profitable over the last twelve months, a factor that investors should consider. On a brighter note, analysts forecast that the company will become profitable this year, and the stock has experienced a significant 254.96% return over the last year, which may be indicative of positive investor sentiment and market momentum.
For those seeking a deeper dive into EverQuote's financial health and future prospects, InvestingPro offers an array of additional tips—in fact, there are 10 more tips available that provide further insights into EverQuote's performance and outlook. These can be accessed through the dedicated InvestingPro platform for EverQuote at https://www.investing.com/pro/EVER.
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