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On Thursday, BofA Securities analysts made a significant adjustment to Ibotta Inc’s (NYSE:IBTA) stock rating, downgrading it from ’Buy’ to ’Neutral’ and significantly reducing the price target from $90.00 to $40.00. The revision comes as a consequence of Ibotta’s fourth-quarter revenue falling short of expectations, along with a disappointing forecast for the first quarter. The stock, currently trading at $37.25, has declined 8% in the past week and 39% over the last year, according to InvestingPro data.
The primary concern highlighted by the analysts was the underperformance in Ibotta’s third-party platform (3PP) segment, which has been the company’s main growth driver. Despite previously outperforming expectations, the latest results indicate a considerable shortfall. Ibotta has pointed to ongoing supply constraints among consumer packaged goods (CPG) clients, which have not improved as anticipated and are likely to continue posing challenges in the near term. Still, the company maintains impressive gross profit margins of 86% and achieved revenue growth of 15% in the last twelve months.
Additionally, Ibotta is experiencing difficulties in its transition from an ad-hoc, annual budget model to a more consistent, programmatic approach with enhanced targeting capabilities. This shift is expected to affect growth in the upcoming quarters and potentially in the following years. While two major CPG clients have progressed beyond the testing phase, most of Ibotta’s clients are adopting a cautious stance, preferring to observe the performance of new marketing channels before committing their budgets. InvestingPro analysis suggests the stock is currently undervalued, with additional insights available in the comprehensive Pro Research Report covering 1,400+ top US stocks.
Despite these challenges, Ibotta’s shares are currently trading at a multiple of 44 times enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). The analysts’ price objective valuation is based on projections for the year 2025 but does not factor in potential improvements in growth. The report indicates that while there is healthy demand for digital coupon redemptions, the aforementioned issues are significant enough to warrant a more conservative outlook on the stock.
In other recent news, Ibotta Inc has been the subject of multiple analyst reviews following its fourth-quarter earnings report, which did not meet expectations. Needham analysts have adjusted their price target for Ibotta to $60, maintaining a Buy rating despite acknowledging the company’s supply constraints affecting revenue growth. Meanwhile, Citi downgraded Ibotta from Buy to Neutral, significantly lowering the price target to $44 due to concerns over advertising supply issues impacting revenue visibility. Raymond (NSE:RYMD) James also downgraded Ibotta, moving it to Market Perform, citing underwhelming earnings and a weaker outlook for the next quarter.
Goldman Sachs has reduced its price target for Ibotta to $56 but continues to hold a Buy rating, noting challenges in advertiser demand and medium-term headwinds. Despite these challenges, Goldman Sachs remains optimistic about Ibotta’s long-term growth potential. JMP Securities has lowered its price target to $58 while maintaining a Market Outperform rating, expressing concerns about competition from retail media networks like Walmart (NYSE:WMT). However, JMP sees opportunities for Ibotta to capture a larger share of CPG advertising budgets, given the development of new measurement tools.
These recent developments highlight the various challenges and opportunities facing Ibotta as it navigates a complex advertising landscape. Analysts are closely monitoring the company’s efforts to improve its measurement tools and sales execution to enhance its market position.
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