On Monday, Needham, a renowned investment firm, initiated coverage on shares of Similarweb Ltd (NYSE:SMWB), a company specializing in web analytics. The firm issued a Buy rating and set a price target of $11.00 for the company's stock.
This positive outlook is based on Similarweb's position as an early leader in the web analytics industry, with a robust and unique data offering, which it capitalizes on through five distinct Software as a Service (SaaS) applications.
Needham's endorsement is bolstered by the company's accelerating revenue growth, which is attributed to a resurgence in demand and a reduction in down sell activities. Moreover, the firm notes that Similarweb's profitability is improving rapidly.
The investment firm recognizes the ongoing shift in both B2C and B2B commerce towards more intensive digital channel engagement, which is expected to sustainably drive revenue growth for Similarweb in the medium term.
The price target of $11.00 is grounded on an enterprise value to revenue (EV/Revenue) multiple of 3.5 times the forecasted revenues for the fiscal year 2025. Needham believes that this valuation could increase if Similarweb maintains higher revenue growth rates or if the company's profitability improvements exceed current predictions.
Needham's analysis emphasizes the significant total addressable market (TAM) for Similarweb's offerings, suggesting that the company is well-positioned to capitalize on the expanding digital economy. The firm's optimistic stance reflects confidence in Similarweb's ability to leverage its differentiated data assets and SaaS applications to generate robust revenue streams and enhanced profitability.
In conclusion, the initiation of coverage by Needham with a Buy rating and an $11.00 price target reflects a positive outlook for Similarweb Ltd, highlighting the company's potential for growth and profitability in the evolving digital landscape.
In other recent news, Similarweb Ltd., a global digital market intelligence company, completed an underwritten public offering initiated by a selling shareholder. The offering comprised 3.5 million ordinary shares priced at $7.85 each, generating gross proceeds of approximately $27.5 million for the selling shareholder.
Notably, Similarweb did not receive any proceeds from this transaction. The offering was managed by Goldman Sachs & Co. LLC and Barclays, with Citizens JMP, William Blair, and Needham & Company serving as co-managers.
During a recent earnings call, Similarweb reported an increase in customer retention and strategic account growth, including the acquisition of a significant eight-digit customer. The company also announced its third consecutive quarter of positive free cash flow and its fourth successive quarter of operating profit. Similarweb's acquisition of 42matters is expected to enhance its digital asset analytics offerings.
Analysts at JMP Securities maintained a Market Outperform rating for Similarweb, citing the company's diverse digital data products and significant total addressable market, estimated at $52 billion. The firm also noted Similarweb's positive financial performance and strategic acquisitions as factors reinforcing their confidence in the company's market position. These are among the recent developments for Similarweb.
InvestingPro Insights
Complementing Needham's bullish outlook on Similarweb Ltd (NYSE:SMWB), recent data from InvestingPro provides additional context to the company's financial performance and market position. The company's impressive gross profit margin of 79.26% for the last twelve months as of Q2 2024 underscores its ability to maintain profitability in its core operations, aligning with Needham's observation of improving profitability.
InvestingPro data reveals a strong revenue growth of 11.26% over the same period, with an even more robust quarterly growth of 12.96% in Q2 2024. This acceleration in revenue growth supports Needham's assessment of increased demand and reduced down sell activities.
Furthermore, InvestingPro Tips highlight that 5 analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Similarweb's financial prospects. The company's stock has also shown a strong return over the last three months, with a price total return of 32.9%, indicating positive market sentiment.
For investors seeking a deeper understanding of Similarweb's potential, InvestingPro offers 11 additional tips, providing a comprehensive analysis of the company's financial health and market position.
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