Wells Fargo analysts cut Doximity Inc (NYSE:DOCS) to Equal Weight from Overweight, cutting the firm's price target on the stock to $37 from $39 in a note to clients on Monday.
The analysts said that the firm's survey highlights resilience, but pharma budget growth limits the upside prospects for Doximity's shares.
"Our proprietary Doximity client survey suggests digital 2023 ad budgets are growing mid-to-high- single digits," the analysts wrote. "This appears to be a deceleration from the LDD outlook we anticipated from September of last year (~12% expected in 2023E per eMarketer data). Although 40% of respondents are seeing their digital ad budgets expand on average by 13% y/y in 2023, 60% recognize only 2.5% y/y budget expansion on average. Net-net, according to our survey ad budget growth in 2023 (F2024) averages to 6.5%."
They added that inclusive of wallet share gains, the firm calculated surveyed clients expect to spend 15% more with Doximity in 2023 vs 2022 and that since this doesn't include intra-year budget expansions, new logos, or client wins, they think Doximity's path to 20%+ top-line growth in F2024 is achievable.
"However, with the end market appearing to slow to MSD/HSD and with 60% of surveyed companies already allocating at least 30% of their ad budgets to DOCS, we think sources for upside to our Bull case may be limited," they cautioned.