Tuesday, Loop Capital initiated coverage on Integral Ad Science Holding Corp (NASDAQ:IAS) stock with a Buy rating and a price target of $15.00. The firm cited the company's history of surpassing revenue guidance and its realistic fiscal year 2024 (FY24) revenue outlook as reasons for the positive rating.
Integral Ad Science has consistently exceeded the higher end of its revenue guidance for 11 consecutive quarters since becoming a public entity. The firm has only once revised its previously issued FY guidance downward in nearly three years. This track record supports the analyst's confidence in the company's ability to meet its current FY24 revenue projections.
The company's valuation has notably declined by half since it announced its fourth-quarter 2023 results and provided FY24 revenue guidance that fell short of market expectations.
In response, management has negotiated multi-year volume commitments with several large customers by offering discounts on legacy Measurement products, along with upselling new products. Loop Capital views this strategy as a singular event that should not raise concerns about the broader ad verification market.
Currently, Integral Ad Science is trading at a multiple of 3.1 times Loop Capital's FY24 revenue estimate. This represents a significant discount when compared to its main competitor, DoubleVerify (NYSE:DV) (Buy/$39 PT), which trades at 7.0 times, and the average of the internet advertising technology sector at 4.8 times. The analyst believes that this discount is due to investor skepticism regarding the company's estimates for the year.
Loop Capital concludes that the current stock valuation of Integral Ad Science presents a favorable risk/reward scenario. This assessment is based on their analysis indicating that the company's FY24 guidance is no more at risk than that of its main competitor.
InvestingPro Insights
In light of Loop Capital's optimistic outlook on Integral Ad Science Holding Corp (NASDAQ:IAS), recent data from InvestingPro provides additional context for investors. Despite a challenging market, Integral Ad Science is expected to see net income growth this year, aligning with the analyst's positive sentiment. However, it's worth noting that four analysts have revised their earnings downwards for the upcoming period, suggesting some caution may be warranted.
From a valuation standpoint, the company is trading at a high earnings multiple, with a P/E ratio of 213.7 and an adjusted P/E ratio for the last twelve months as of Q4 2023 at 215.3. This is significantly above the market average, indicating a premium on the company's earnings. Yet, the stock has experienced a significant price drop over the last three months, falling by 32.71%, which may present a buying opportunity for those who believe in the company's fundamentals and long-term strategy.
InvestingPro also shows that the company operates with a moderate level of debt and has liquid assets that exceed its short-term obligations, which is reassuring for its financial health. For investors looking for more in-depth analysis, there are additional InvestingPro Tips available, providing a comprehensive view of Integral Ad Science's financial status and future prospects. To discover more and take advantage of these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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