Friday - B.Riley has resumed coverage on QuinStreet, Inc. (NASDAQ:QNST) stock, a digital performance marketing company, with a Buy rating and a price target of $21.50. The firm highlights QuinStreet's stability in revenue amidst challenges in the auto insurance sector and anticipates strong growth driven by a rebound in marketing spend by auto insurance carriers.
QuinStreet, which specializes in marketing for financial and home services industries, has managed to maintain steady revenue year-over-year in fiscal years 2022 and 2023, despite significant obstacles in the auto insurance vertical. The company's ability to sustain positive adjusted EBITDA was bolstered by its performance in credit-driven and home services sectors.
The analyst from B.Riley projects that the upcoming fiscal year 2024 will witness a surge in marketing expenditures from auto insurance carriers. This increase is expected to fuel growth across QuinStreet's major verticals, with a particularly strong impact from the auto insurance sector. The firm anticipates this will result in sustained double-digit revenue growth and enhanced adjusted EBITDA leverage in fiscal years 2025 and 2026, which end in June.
The coverage notes that QuinStreet's year-to-date share performance has seen a significant increase of 32%, in contrast to the Russell 2000 Index's decrease of 2.9%. Despite this strong performance indicating a potentially more balanced risk/reward profile in the short term, B.Riley suggests there is potential for further upside.
The anticipated multiyear recovery in insurance carrier marketing spend, coupled with continued growth in non-insurance verticals, could lead to performance that exceeds current fiscal year 2025 consensus expectations.
The price target of $21.50 set by B.Riley for QuinStreet is based on a calendar year 2025 enterprise value/adjusted EBITDA multiple of 17 times. This target reflects the firm's confidence in QuinStreet's future performance and its strategic position within its industry verticals.
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