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On Friday, Benchmark analysts maintained a Buy rating and an $8.00 price target on Direct Digital Holdings Inc. (NASDAQ:DRCT), currently trading at $0.74 with a market capitalization of $20.3 million. The stock has shown remarkable recent momentum, surging over 70% in the past week, as analysts acknowledge recovery signs after a challenging period. According to InvestingPro data, the company faces significant headwinds with negative EBITDA of -$15.1 million in the last twelve months. The firm recognized that Direct Digital concluded 2024 on a note of recovery, starting to bounce back from the impact of short report attacks which had previously stalled the company’s revenue and growth.
Direct Digital’s management has reaffirmed their revenue guidance for the fiscal year 2025, showing confidence despite ongoing macroeconomic uncertainties and a significant revenue decline of 35.8% in the last twelve months. This optimism is partly due to recent successes on the buyside as the company awaits the sell-side to scale up again. Benchmark analysts also noted Direct Digital’s cost-saving measures, suggesting the potential for adjusted EBITDA to reach breakeven or better within the year. InvestingPro subscribers can access 18 additional key insights about DRCT’s financial health and growth prospects.
The analysts highlighted that while they believe in management’s claims of returning customers and platform rebuilding, it may take several quarters of sequential growth and possibly updated guidance to regain momentum for Direct Digital’s stock. The firm sees value in the stock at its current levels, despite a challenging debt-to-equity ratio and current ratio of 0.25, and anticipates a potential increase once the company’s momentum is restored, supported by new strategic initiatives like direct DSP integrations, curation, and video offerings. Get comprehensive analysis and Fair Value estimates for DRCT and 1,400+ other stocks with an InvestingPro subscription.
Direct Digital’s stock trajectory had previously experienced a steep incline when momentum was in favor, and Benchmark’s analysis suggests a similar pattern could emerge as the company’s strategies unfold. Despite the hurdles faced in the past year, the outlook for Direct Digital remains positive in the eyes of Benchmark analysts, who are waiting for the full realization of their original investment thesis with added developments.
In other recent news, Direct Digital Holdings Inc. reported a significant earnings miss for the fourth quarter of 2024. The company’s earnings per share came in at -$0.54, falling short of the forecasted $0.11, and its revenue declined sharply to $9.1 million from $41 million in the same quarter of the previous year. Despite the revenue drop, Direct Digital managed to improve its gross margin from 23% to 32%, indicating better cost management. The company has set a revenue guidance range of $90-110 million for 2025, with expectations of strong growth in the latter half of the year.
Direct Digital Holdings is focusing on middle-market advertising and new initiatives to drive future profitability. The company is also exploring alternative revenue pathways and direct connections to enhance its business model. CEO Mark Walker emphasized the strategic initiatives aimed at optimizing supply path efficiency and exploring new verticals. Analysts from The Benchmark Company expressed interest in the company’s recovery strategy and its plans for middle-market advertising.
Additionally, the company has been working on cost-saving measures, which resulted in a reduction of operating expenses. Direct Digital Holdings is actively advancing multiple funding and equity financing pathways to strengthen its financial position and support key growth initiatives. The company is optimistic about the growth potential in the ad tech arena, particularly in areas such as curation and data enrichment.
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