On Wednesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Definitive Healthcare Corp (NASDAQ:DH) by reducing its price target from $10.00 to $7.00, while maintaining a Hold rating on the stock. This change comes after the company reported its first-quarter results and revised its 2024 guidance downwards, citing macroeconomic challenges and internal restructuring as key factors for the adjustment.
Definitive Healthcare's shares experienced a steep decline, dropping more than 30% in the morning trading session following the market's open. The company has forecasted a year-over-year revenue growth of 1% to 4% for the fiscal year 2024, aiming for a range of $255 million to $261 million. This projection is a decrease from the previously guided growth of 5% to 7%. Additionally, the adjusted EBITDA guidance has been lowered to $81.5 million to $84.5 million, suggesting an EBITDA margin between 32.0% and 32.4%, compared to the former margin guidance of 31.9% to 32.7%.
The sluggish start to the year is largely attributed to extended sales cycles due to increased scrutiny on spending by new logo buyers, as well as significant disruptions in sales efforts caused by the company's restructuring at the beginning of the year. Despite these challenges, Definitive Healthcare is focusing on improving operational efficiencies and expects to see an increase in operating leverage in sales and marketing by 300 to 400 basis points year-over-year.
The company has also indicated positive developments in customer retention, attributing this to consistent improvements in delivery and services. It now expects net dollar retention (NDR) to expand by 100 to 200 basis points by the end of the year, which would reverse the previously declining trend. However, the immediate market reaction to these announcements was negative, with the stock's value falling by 31.0% on the day of the announcement.
InvestingPro Insights
As Definitive Healthcare Corp (NASDAQ:DH) navigates through its restructuring and revised guidance for 2024, investors may find the latest data from InvestingPro to be of interest. The company, with a market capitalization of $1.14 billion, is trading at a price-to-book ratio of 1.32, which can be appealing to value investors looking for assets that are potentially undervalued compared to their book value. Despite a challenging macroeconomic environment, Definitive Healthcare has demonstrated resilience with a gross profit margin of 86.18% over the last twelve months as of Q1 2023, showcasing its ability to maintain profitability amidst cost pressures.
Two notable InvestingPro Tips for Definitive Healthcare include the expectation of net income growth this year and the company's liquid assets exceeding its short-term obligations, indicating a stable financial position for the near term. These insights, coupled with analysts' predictions that the company will be profitable this year, could provide a more nuanced perspective for investors considering the stock's potential. For those interested in further analysis, InvestingPro offers additional tips on their platform, and users can utilize the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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