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On Wednesday, Needham, a financial services firm, raised the price target for Similarweb Ltd (NYSE: NYSE:SMWB) to $14.00 from the previous $11.00. The firm maintained a Buy rating on the stock. The upgrade comes after Similarweb reported a third quarter that featured continued revenue growth for the fourth consecutive quarter. The company saw improvements in customer retention rates and an increase in large customer Net Revenue Retention (NRR) by 200 basis points.
The company's recent performance was bolstered by robust customer additions, including the acquisition of its second eight-figure customer in October. This growth has been attributed in part to the rising interest in using digital data for Large Language Model (LLM) training, which is serving as a catalyst for expansion within the industry.
Needham's analyst noted that Similarweb's improved go-to-market (GTM) initiatives are driving strong pipeline trends. In response to these opportunities, Similarweb plans to make strategic investments to capitalize on this momentum. However, these investments are expected to potentially limit margin expansion in the short term. Despite this, the analyst expressed confidence in a projected near-term revenue growth of approximately 20%.
The increased price target to $14 reflects higher growth assumptions and the belief that Similarweb is well-positioned to emerge as a winner in the artificial intelligence space. The company's strong value proposition, underpinned by its data offerings, was highlighted as a key factor in this positive outlook.
In other recent news, digital market intelligence company, Similarweb Ltd, has been making significant strides. The company recently completed an underwritten public offering initiated by a selling shareholder, generating gross proceeds of approximately $27.5 million. This was followed by an additional share offering, culminating in gross proceeds of about $4.12 million for the selling shareholder.
During its recent earnings call, Similarweb reported an increase in customer retention and strategic account growth, including the acquisition of a significant eight-digit customer. The company also announced its third consecutive quarter of positive free cash flow and its fourth successive quarter of operating profit.
Investment firm Needham initiated coverage on Similarweb shares with a Buy rating, based on the company's robust revenue growth and improving profitability. Similarly, JMP Securities maintained a Market Outperform rating for Similarweb, citing the company's diverse digital data products and significant total addressable market.
InvestingPro Insights
Similarweb Ltd (NYSE: SMWB) has been experiencing significant momentum in the market, aligning with Needham's optimistic outlook. According to InvestingPro data, the company has shown impressive revenue growth of 11.26% over the last twelve months as of Q2 2024, with quarterly revenue growth reaching 12.96% in Q2 2024. This growth trend supports Needham's projection of near-term revenue growth around 20%.
InvestingPro Tips highlight Similarweb's "impressive gross profit margins," which is reflected in the data showing a gross profit margin of 79.26% for the last twelve months. This robust margin underscores the company's strong value proposition in the digital data and AI space, as mentioned in the analyst's report.
The stock's recent performance has been remarkable, with InvestingPro data showing a one-year price total return of 125.26% and a year-to-date return of 100.75%. This aligns with the InvestingPro Tip noting a "significant return over the last week" and that the stock is "trading near 52-week high."
It's worth noting that while Similarweb shows strong growth and market performance, it "operates with a moderate level of debt" and was "not profitable over the last twelve months," according to InvestingPro Tips. This information provides context to Needham's observation about potential limited margin expansion in the short term due to strategic investments.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Similarweb, providing a deeper understanding of the company's financial health and market position.
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