MediaAlpha stock sinks following Q4 earnings miss

Investing.com -- MediaAlpha Inc. (NYSE: MAX) shares tumbled 22% after the digital advertising platform reported fourth-quarter earnings that fell short of Wall Street expectations, despite surpassing revenue estimates and showing significant year-over-year (YoY) growth.

The Los Angeles-based company posted Q4 earnings per share (EPS) of $0.08, missing the consensus estimate of $0.22 by $0.14. However, revenue for the quarter was $300.6 million, slightly above the expected $298.3 million, and represented a 157% increase YoY. The transaction value also saw a remarkable 202% YoY increase to $499.2 million, with the Property & Casualty (P&C) insurance vertical experiencing an impressive 639% YoY growth.

Despite these gains, MediaAlpha’s forward-looking guidance indicated a potential slowdown. The company forecasts Q1 2025 revenue to be between $225 million and $245 million, which is below the consensus estimate of $268.6 million. This outlook reflects a high single-digit sequential decline in P&C transaction value as pricing is expected to moderate from Q4 levels, partially offset by rising volumes. The Health vertical is anticipated to see a high-teens percentage decline in transaction value YoY due to softening conditions in the under-65 market.

MediaAlpha’s full-year 2024 results demonstrated a robust performance with revenue growing 123% to $864.7 million and transaction value up 151% to $1.5 billion. The company also reported a significant improvement in net income, posting $22.1 million compared to a net loss of $56.6 million in the previous year. Adjusted EBITDA reached a record $96.1 million, a substantial increase from $27.1 million in 2023.

The company’s CEO, Steve Yi, expressed confidence in the company’s marketplace model and the sustained growth driven by favorable trends in the auto insurance sector. However, MediaAlpha is currently in settlement discussions with the FTC and has recorded a $7.0 million reserve related to this matter.

Analysts have adjusted their outlook on MediaAlpha following the earnings report. Goldman Sachs analyst Eric Sheridan lowered the price target to $14.00 from $23.00 while maintaining a Buy rating, noting the P&C market recovery and the FTC inquiry as key investor focuses. "Over the short-to-medium-term, we expect investor focus to remain around both the scope/trajectory of the P&C insurance market recovery & any updates on the outstanding FTC inquiry related to MAX’s Health segment," Sheridan commented.

Keefe, Bruyette & Woods analyst Tommy McJoynt also reduced the price target to $19.00 from $22.00 while maintaining an Outperform rating, citing a more measured guide for the next quarter and no update on the FTC complaint.

Investors appear to be weighing the mixed results and cautious outlook, resulting in the significant drop in MediaAlpha’s stock price during the trading session.

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