On Wednesday, Jefferies initiated coverage on Similarweb Ltd (NYSE:SMWB), a provider of digital intelligence and marketing analytics, with a Buy rating and increased the price target to $10.00 from the previous $8.00. The firm highlighted the company's improved fundamentals and the potential for revenue growth reacceleration following the launch of Similarweb 3.0 and a new pricing strategy.
The company's recent release of Similarweb 3.0, along with a revised modular pricing approach, is expected to drive a reacceleration of revenue growth in 2024. Jefferies anticipates this growth to include a mid-teens exit rate. The firm's analysis suggests that Similarweb is on track to generate consistent profitability growth and a high teens revenue compound annual growth rate (CAGR) through 2026.
Jefferies' outlook for Similarweb is based on the company's strategic initiatives that are believed to underpin the anticipated revenue growth. The firm's valuation of Similarweb at 1.6 times enterprise value to revenue (EV/Rev) is considered attractive, indicating a positive view of the company's market positioning and financial prospects.
The coverage assumes that Similarweb's business has stabilized and is now positioned for a sustained period of growth. According to Jefferies, the digital intelligence firm is expected to achieve a consistent increase in profitability, reinforcing the Buy rating.
The updated price target and favorable rating reflect Jefferies' confidence in Similarweb's business strategy and market potential. The firm's analysis suggests that investors could see value in the company's stock, given the expected financial performance and growth trajectory through 2026.
InvestingPro Insights
As Jefferies initiates coverage on Similarweb Ltd with a bullish stance, a closer look at the company's financials through InvestingPro data reveals a nuanced picture. Similarweb's market capitalization stands at $458.67 million, indicative of its mid-cap status in the market. The company's impressive gross profit margin, which has reached 76.93% in the last twelve months as of Q3 2023, underscores its ability to maintain profitability on its core services despite not being profitable overall during this period.
InvestingPro Tips highlight that Similarweb is trading at a high Price / Book multiple of 37.65, reflecting a premium valuation that investors are willing to pay for its assets relative to the book value. Furthermore, the company has demonstrated a strong return over the last three months, with a price total return of 16.73%, suggesting a positive short-term investor sentiment. However, analysts are cautious about the company's near-term profitability, as they do not anticipate Similarweb to be profitable this year.
For those interested in a deeper dive into Similarweb's financial health and market potential, there are additional InvestingPro Tips available at https://www.investing.com/pro/SMWB. For a limited time, use coupon code SFY24 to get an additional 10% off a 2-year InvestingPro+ subscription, or SFY241 to get an additional 10% off a 1-year InvestingPro+ subscription.
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