On Monday, Truist Securities adjusted its outlook on Shutterstock , Inc. (NYSE:SSTK), a leading global provider of stock photography, stock footage, stock music, and editing tools, by reducing the share price target from $70.00 to $65.00. Despite the lower price target, the firm maintained a Buy rating on the stock.
Shutterstock's first-quarter results for 2024 reflected a mixed performance, with the company's Digital Design Software (DDS) segment showing strong execution, bolstered by new and expanded data deals. However, the Content segment faced challenges as management works on repositioning it for anticipated growth in the second half of 2024.
The company's recent acquisition of Envato, one of its largest deals to date, is seen as a strategic move to add scale, increase subscription services, and pivot Shutterstock further into the video market.
The deal, valued at approximately 7 times the Adjusted Earnings Before Interest, Taxes, Depreciation, and Amortization (AEBITDA) before synergies, is considered reasonable in terms of purchase price. Nonetheless, it introduces an additional layer of execution risk.
Truist Securities highlighted Shutterstock's current valuation metrics, noting that the stock is trading at 5 times Enterprise Value to AEBITDA (EV/AEBITDA), 18 times Price to Earnings (P/E), and offers a 12% Free Cash Flow (FCF) yield.
These figures suggest that the stock is undervalued, making it an attractive investment opportunity according to the firm. The revised price target of $65 reflects a recalibration in response to the recent earnings report and the potential risks and benefits associated with the Envato acquisition.
InvestingPro Insights
For investors considering a position in Shutterstock, Inc. (NYSE:SSTK), current InvestingPro data shows a market capitalization of $1.41 billion, with a P/E ratio of 15.16, reflecting a more conservative valuation compared to the broader market. Furthermore, the company's revenue for the last twelve months as of Q1 2024 stands at $873.62 million, with a modest growth rate of 3.51%. The dividend yield as of the latest data is 3.06%, showcasing the company's commitment to returning value to shareholders, having raised its dividend for 4 consecutive years.
Amidst recent market movements, Shutterstock's stock has experienced a notable decline over the past week, with a one-week total return of -8.6%. Despite this, the company's strong cash position, with more cash than debt on its balance sheet, and the ability to cover interest payments with its cash flows, provide a cushion against short-term market volatility. Moreover, Shutterstock has been profitable over the last twelve months, and analysts predict profitability will continue this year.
For a deeper dive into Shutterstock's financial health and future prospects, there are additional InvestingPro Tips available, which can be accessed on the platform. To take advantage of these insights, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 5 more tips listed on InvestingPro for Shutterstock, investors can gain a comprehensive understanding of the stock's potential.
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