On Wednesday, Truist Securities revised its price target for Shutterstock (NYSE: NYSE:SSTK), reducing it to $56 from the previous $65, while retaining a Buy rating for the stock. The adjustment follows Shutterstock's third-quarter 2024 performance, which surpassed expectations, and an upgrade to its full-year 2024 guidance. The company's positive trajectory is attributed to effective strategies in both its Content and Digital Design Services (DDS) sectors.
Shutterstock's Content division, bolstered by the recent acquisition of Envato, exhibited sequential growth. This improvement is partly due to the increasing adoption of the company's Generative+ (Gen+) platform, which has expanded its customer base without undermining its traditional subscription services. Meanwhile, Shutterstock's DDS has seen a boost from new and extended content data agreements, with significant advancements in its Studios and GIPHY offerings.
The firm emphasized Shutterstock's solid operational performance and its promising outlook for fiscal year 2025, noting that the company is well-positioned for continued recovery. The financial metrics provided by Truist Securities highlight Shutterstock's attractive valuation, with the stock trading at 4 times its enterprise value to adjusted EBITDA (EV/AEBITDA), 11.5 times its price-to-earnings (P/E) ratio, and offering a 16% free cash flow yield.
Supporting the favorable valuation, Shutterstock has an active share buyback program in place, along with its dividend payments to shareholders. In light of these factors, Truist Securities has adjusted its estimates and price target for Shutterstock, setting the new target at $56, which reflects a more conservative valuation in comparison to the previous target.
In other recent news, Shutterstock, Inc. reported a 5.4% year-over-year increase in second-quarter revenue, reaching $220 million, primarily driven by its Data, Distribution, and Services business. However, the Content business saw a 9% decline in revenue. In a strategic move, Shutterstock discontinued its drug candidate '154, and will now focus on developing SL-325, a DR3 antibody for treating inflammatory bowel disease.
The company also announced a cash dividend of $0.30 per share, reflecting its commitment to shareholder value. Analysts from Citi downgraded Shutterstock from Buy to Neutral, reducing the price target, while Needham maintained a Buy rating but also lowered its price target due to reduced revenue projections for the Content division.
Shutterstock has made recent acquisitions, including Envato, expected to bolster the Content business and add an estimated $75 million to 2024 revenues. The company also launched new GenAI 3D capabilities and partnered with Databricks, indicating a focus on technological advancements.
In a significant collaboration, Shutterstock's subsidiary, GIPHY, is teaming up with TikTok to enhance its messaging feature with AI-driven GIF suggestions, expected to launch in late Q4 or early Q1.
InvestingPro Insights
Complementing Truist Securities' analysis, InvestingPro data offers additional insights into Shutterstock's financial health and market performance. The company's market capitalization stands at $1.15 billion, with a P/E ratio of 29.24, which aligns with the valuation metrics highlighted in the article.
InvestingPro Tips reveal that Shutterstock holds more cash than debt on its balance sheet, indicating a strong financial position. This is particularly relevant given the article's mention of the company's active share buyback program and dividend payments. Speaking of dividends, an InvestingPro Tip notes that Shutterstock has raised its dividend for 5 consecutive years, underscoring its commitment to shareholder returns.
The company's revenue for the last twelve months as of Q2 2024 was $884.84 million, with a revenue growth of 4.6%. This growth, albeit modest, supports the article's narrative of Shutterstock's positive trajectory and effective strategies in its Content and Digital Design Services sectors.
It's worth noting that while the stock price has fallen significantly over the last three months, as indicated by an InvestingPro Tip, the company remains profitable over the last twelve months. This profitability, combined with analysts' predictions of continued profitability this year, aligns with Truist Securities' outlook on Shutterstock's potential for recovery.
For investors seeking a more comprehensive analysis, InvestingPro offers 5 additional tips that could provide further insights into Shutterstock's financial health and market position.
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