On Tuesday, Canaccord Genuity adjusted its outlook on Fluent Inc. (NASDAQ: NASDAQ:FLNT), reducing the price target to $4.00 from the previous $4.50, while retaining a Hold rating on the shares. The adjustment follows Fluent's reported decline in second-quarter revenue by approximately 28% year-over-year.
The downturn was attributed to industry-wide unauthorized activity related to Affordable Care Act policies, which negatively affected the quarter's performance. Additionally, the lingering effects of a settlement with the Federal Trade Commission (FTC) continued to exert pressure on the company.
Despite these challenges, Fluent saw a silver lining as its newer syndicated performance marketplaces outperformed management's internal forecasts for both revenue and profitability in the second quarter. The company's Adflow platform has been growing, thanks to the addition of new partners in the retail and ticketing sectors, as well as expanded presence in the grocery industry.
Looking to the future, Fluent anticipates a return to single-digit year-over-year growth in the third quarter and aims for double-digit growth in the fourth quarter and into the following year. Management is also targeting a mid-single-digit adjusted EBITDA margin for the second half of the year.
However, due to the current operating challenges, Canaccord Genuity has decided to maintain its Hold rating on Fluent shares. The firm awaits greater clarity on the potential for sustainable revenue growth, which may emerge as the new syndicated marketplaces gain traction and the core owned and operated marketplaces achieve stability.
Fluent saw a significant development with stockholders approving the issuance of pre-funded warrants. This decision was reached during a special meeting where three key proposals were discussed, all of which received a majority of votes in favor.
The first proposal, supported by 8,660,908 votes, allowed for the conversion of pre-funded warrants into common stock. The second proposal, passing with 8,659,513 votes, involved issuing pre-funded warrants to certain company personnel and a consultant.
On the financial front, Fluent's Q1 2024 earnings report revealed a 14.6% decrease in revenue, amounting to $66 million. Despite this, Fluent reported an increased media margin of 33.6% of revenue, up from 28.6% the previous year, and an adjusted EBITDA of $0.7 million. The company experienced a net loss of $6.3 million and an adjusted net loss of $4.2 million.
InvestingPro Insights
As Fluent Inc. (NASDAQ:FLNT) navigates through its operational challenges, InvestingPro data reveals a nuanced financial landscape. The company's market capitalization stands at $48.74 million, reflecting its scale in the market. Despite a challenging period, Fluent's revenue over the last twelve months as of Q1 2024 reached $287.13 million, although it experienced a decline of 17.8% during that period. This underscores the revenue pressures highlighted in the article. Furthermore, the company's gross profit margin remains at 27.22%, indicating its ability to retain a portion of sales as gross profit.
From an investment standpoint, two InvestingPro Tips suggest caution: analysts have recently revised their earnings expectations downwards, and the company is trading at a high EBITDA valuation multiple, which could imply that the market has priced in optimistic growth expectations that may not materialize. This is particularly relevant considering the company's stock price volatility and the analysts' consensus that profitability is not anticipated this year. For investors seeking a comprehensive understanding of Fluent's investment potential, there are additional tips available on InvestingPro that can provide deeper insights into the company's performance and valuation.
Finally, the fair value assessments from analysts and InvestingPro place Fluent's shares at $4.50 and $3.72, respectively, compared to its recent close at $3.00. This suggests a potential upside, but also reflects the uncertainty surrounding the company's future performance. With these insights, investors can better weigh Fluent's prospects against the operational challenges it faces.
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