On Monday, SEMrush Holdings, Inc. (NYSE:SEMR) stock received an upgrade from Morgan Stanley (NYSE:MS), with the firm's analysts raising the stock rating from Equalweight to Overweight. Accompanying the upgrade, Morgan Stanley also increased the price target for SEMrush to $20.00, up from the previous target of $17.00.
The revision reflects Morgan Stanley's positive outlook on the company's potential for growth and profitability. According to InvestingPro data, five analysts have recently revised their earnings upward for the upcoming period, with price targets ranging from $16 to $21.
SEMrush, a company specializing in online visibility management, has been recognized by Morgan Stanley as a leader in its field. The analyst, Elizabeth Porter, noted that SEMrush is well-positioned to accelerate its growth, particularly through its large enterprise product opportunities. This growth potential is supported by the company's impressive 83% gross profit margin and 22% revenue growth over the last twelve months, as reported by InvestingPro.
Porter highlighted that the company's prospects for expansion are currently undervalued in the market, with shares trading at approximately 0.16x EV/S/G—a metric that combines enterprise value with sales growth.
The upgrade comes with an optimistic view of SEMrush's ability to overcome challenges that have previously impacted small and medium-sized businesses (SMBs) and freelancers. According to Morgan Stanley, alleviation of these headwinds is expected to contribute to the company's revenue growth. The company's strong financial position is evident in its healthy current ratio of 2.41 and minimal debt-to-equity ratio of 0.05.
Furthermore, the firm anticipates that SEMrush will achieve margin expansion, which will support sustainable and profitable revenue growth exceeding 20%. For deeper insights into SEMrush's financial health and growth prospects, investors can access the comprehensive Pro Research Report available on InvestingPro.
Morgan Stanley's analysis suggests that the market has yet to fully appreciate SEMrush's growth trajectory and its potential to generate higher revenues and margins. The new Overweight rating indicates that Morgan Stanley believes SEMrush stock has a favorable risk-reward profile and that the company's financial performance will likely exceed the industry average.
SEMrush's stock price is anticipated to respond to Morgan Stanley's updated assessment and price target. Investors and market watchers will be keeping an eye on the company's performance to see if it aligns with the growth and profitability that Morgan Stanley's analysis projects.
In other recent news, Semrush Holdings reported a robust growth in the third quarter of 2024.
The company's revenue saw a 24% increase year-over-year, reaching $97.4 million, and the non-GAAP operating income stood at $12.1 million. A significant improvement in the non-GAAP operating margin to 12.4% was also noted. Additionally, the annual recurring revenue (ARR) rose by 24% to $401 million, with approximately 1,300 new paying customers added.
In light of these developments, Semrush has raised its full-year revenue guidance for 2024. The company now anticipates a Q4 2024 revenue between $100.8 million and $101.8 million and a full-year revenue between $375 million and $376 million. The company maintains a strong balance sheet with $233 million in cash and investments.
Furthermore, Semrush's enterprise SEO product, launched in May 2023, has been gaining traction with over 90 accounts migrated by October. The company's net revenue retention rate stood at 107%, with higher ARR segments retaining above 120%. These recent developments underscore Semrush's continued growth and its adaptability in the expanding digital marketing landscape.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.