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On Thursday, Citi analysts adjusted their stance on Ibotta Inc (NYSE:IBTA), downgrading the stock from Buy to Neutral and significantly reducing the price target to $44 from the previous $82. The revision comes in light of concerns about advertising supply issues that are affecting the company’s revenue visibility and profitability. According to InvestingPro data, the stock has already declined 8% in the past week, though the company maintains impressive gross profit margins of 86% and a strong financial health rating.
Citi’s commentary highlighted the challenges Ibotta is facing with its advertising supply, which has prompted a reassessment of the stock’s potential. The analysts noted that while they recognize Ibotta’s unique closed-loop attribution model and its partnerships with major retailers such as Walmart (NYSE:WMT), Instacart (NASDAQ:CART), and the forthcoming collaboration with DoorDash (NASDAQ:DASH), they anticipate it will take time for the company to demonstrate return on ad spend (ROAS) to its advertising partners. Trading at an EV/EBITDA multiple of 44x, the stock appears richly valued despite its current price being below InvestingPro’s calculated Fair Value.
The analysts elaborated that most advertising partners allocate their budgets on an annual basis, which adds to the time required for Ibotta to rebuild its sales force and prove its ROAS. Consequently, Citi believes the risk/reward ratio for Ibotta shares is now balanced at their current levels, leading to the decision to downgrade the stock to a Neutral rating. For deeper insights into Ibotta’s valuation and growth prospects, InvestingPro subscribers can access exclusive financial metrics and a comprehensive Pro Research Report, part of the platform’s coverage of over 1,400 US stocks.
Citi’s revised price target reflects an expected total return (ETR) of approximately +11% based on the after-market close. The firm will continue to monitor Ibotta’s progress, particularly in the development of its new measurement tool, CPID, improvements in sales efficiency, and the expansion of its advertising supply. These factors are considered critical to Ibotta’s ability to deliver long-term growth, especially given its current revenue growth of 14.75% and strong balance sheet position with more cash than debt.
In other recent news, Ibotta Inc. reported its fourth-quarter earnings for 2024, revealing an earnings per share (EPS) of $0.67, which fell short of the expected $0.71. The company’s revenue for the quarter was $98.4 million, marking a slight decline from the previous year. Following these results, Raymond (NSE:RYMD) James downgraded Ibotta’s stock rating from Outperform to Market Perform, citing a weaker outlook for the first quarter of 2025. Goldman Sachs also adjusted its price target for Ibotta, lowering it to $56 while maintaining a Buy rating, indicating some confidence in long-term growth despite short-term challenges. Similarly, JMP Securities revised its price target to $58 but retained a Market Outperform rating, highlighting potential opportunities in the consumer packaged goods (CPG) sector. Ibotta’s management acknowledged facing a challenging advertiser demand environment, affecting its revenue outlook. The company plans to address these issues by developing new measurement tools and investing in advertising technology, which could support future growth.
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