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Tuesday, Goldman Sachs analysts adjusted their outlook on MediaAlpha (NYSE: MAX) shares, reducing the price target to $14.00 from the previous $23.00 while continuing to endorse the stock with a Buy rating. Currently trading at $11.41, the stock has declined 35.5% over the past six months. According to InvestingPro analysis, MediaAlpha appears undervalued based on its Fair Value calculation. This change follows the company’s fourth-quarter earnings release, which presented a mixed picture of its financial health and future prospects.
MediaAlpha’s fourth-quarter earnings revealed a top-line beat, with total transaction value (TTV) and revenues surpassing Goldman Sachs and FactSet Street expectations. However, the beat was not as pronounced as in prior quarters. The performance was primarily attributed to a recovery in the property and casualty (P&C) insurance market. Despite this positive, the company forecasted a first-quarter outlook that fell short of prior expectations. The management cited ongoing challenges in its Health segment, aligning with the trends observed at the end of the fourth quarter, and a P&C market recovery that is anticipated to gain momentum progressively throughout 2025.
The company demonstrated solid operational momentum below the contribution profit line, indicating a commitment to maintaining low overhead growth in the face of a scaling top line. With a current ratio of 1.22 and moderate debt levels, MediaAlpha maintains healthy liquidity. Furthermore, MediaAlpha reported high free cash flow (FCF) conversion, reflecting low capital intensity, with a focus on debt repayment as a capital allocation priority over the medium term. The company’s free cash flow yield stands at 6%, demonstrating efficient capital generation.
Goldman Sachs expects that investor attention will likely stay on the path and scale of the P&C insurance market’s recovery and any updates regarding the ongoing Federal Trade Commission (FTC) inquiry into MediaAlpha’s Health segment. Despite the near-term headwinds, Goldman Sachs’ long-term outlook for MediaAlpha remains positive, citing the company’s leverage to several long-term secular growth themes within the insurance digital advertising market. The reaffirmed Buy rating reflects this sentiment, even as the 12-month price target has been adjusted to the new $14.00 level.
In other recent news, MediaAlpha Inc. reported its Q4 2024 earnings, revealing a mixed financial performance. The company’s earnings per share (EPS) of $0.08 fell short of the projected $0.22, while revenue slightly exceeded expectations at $300.6 million, compared to the forecasted $298.3 million. Despite the revenue beat, the EPS miss led to a negative market reaction. The company achieved a record transaction value of $499.2 million, with significant growth in its insurance verticals and partnerships in the Medicare Advantage market. MediaAlpha’s adjusted EBITDA for the quarter grew by 200% year-over-year, reaching $36.7 million. The health vertical contributed $270 million, accounting for 18% of the total transaction value. The company concluded the quarter with $43 million in cash, maintaining a net debt to adjusted EBITDA ratio of less than 1.3x. Analysts from firms like Canaccord and JPMorgan have been inquiring about the company’s strategies and market conditions, especially concerning the ongoing challenges in the Medicare Advantage sector.
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