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On Wednesday, Evercore ISI analyst Mark Mahaney adjusted the price target for Webtoon Entertainment Inc (NASDAQ:WBTN), reducing it to $20.00 from the previous $23.00. Despite this change, the firm maintained its Outperform rating for the company’s shares. The decision follows Webtoon’s first-quarter earnings report, marking its fourth since going public. According to InvestingPro data, the stock is currently trading at $9.85, significantly below its 52-week high of $25.66, suggesting potential upside based on analyst targets ranging from $9 to $23.
Webtoon reported a quarterly revenue of $326 million, a 5.3% increase excluding foreign exchange influences, slightly surpassing Evercore ISI and general market expectations. The company’s EBITDA for the quarter was $4.1 million, which translates to a margin of 1.3%, also slightly ahead of projections. However, the company’s guidance for second-quarter revenue was mixed, aligning with analyst expectations but showing a lower EBITDA forecast. InvestingPro analysis reveals the company maintains strong financial health with a current ratio of 2.63, indicating solid liquidity, though profitability remains a challenge with negative EBITDA over the last twelve months.
The company’s performance showed signs of softening fundamentals, with a deceleration in revenue growth from 10% in the fourth quarter of 2024 to the current 5.3%, and a significant drop in EBITDA margin from 6.6% in the first quarter of 2024. Additionally, global monthly active users (MAUs) saw a year-over-year decline of 10.5%, falling to 153 million, which was below Evercore ISI’s estimate of 159 million.
Despite these challenges, Mahaney noted a persistent positive outlook for Webtoon, citing a "unique Long Thesis" for the company. He acknowledged the unexpected volatility in Webtoon’s fundamentals during its inaugural year on the stock market but maintained the Outperform rating, reflecting his confidence in the company’s potential. InvestingPro subscribers can access additional insights through the comprehensive Pro Research Report, which includes detailed analysis of Webtoon’s financial health, valuation metrics, and growth prospects among other key indicators.
In other recent news, Webtoon Entertainment Inc. reported its Q1 2025 earnings, revealing a net loss of $22 million, contrasting with a net income of $6.2 million the previous year. Despite the loss, the company experienced a 5.3% revenue growth on a constant currency basis, with strong performance in Japan, which accounted for over 50% of its revenue. The company’s adjusted EBITDA dropped significantly to $4.1 million from $22.2 million a year earlier. In terms of future expectations, Webtoon projects revenue growth between 2.2% and 5.2% for Q2 2025, with anticipated revenue ranging from $335 million to $345 million. The company plans to continue investing in marketing and product improvements, particularly in its English-speaking market. Analysts from Goldman Sachs noted the company’s promising growth in user engagement and product innovation. Meanwhile, Webtoon is also focusing on expanding its global presence, leveraging local content for broader market reach.
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