On Thursday, Roth/MKM maintained a Neutral rating on Veritone (NASDAQ:VERI) but increased the price target to $2.25 from $1.85. The adjustment follows Veritone’s announcement of their financial guidance for FY24, which indicates a potential for non-GAAP profitability by the fourth quarter and for the full year in 2025. The company’s actions to strengthen its financial position include debt reduction and cost structure improvements.
The company's forecast for the fiscal year 2024, on an as-reported basis, suggests modest year-over-year growth. However, Veritone has outlined steps taken to enhance its business operations. These measures include approximately $10 million in annualized cost savings, which began to take effect in the first quarter. Additionally, the company expects to benefit from software revenue synergies that have not been factored into the current guidance.
Veritone’s strategic moves have led to the creation of its largest qualified pipeline to date. The company is also expanding its hiring practices globally and reducing its reliance on Amazon (NASDAQ:AMZN), which is expected to drop from around 11% in 2023 to under 5% in 2024. This diversification effort is aimed at mitigating risks associated with the guidance provided.
In the digital sector, Veritone has experienced significant growth, with a 43% year-over-year increase. Similarly, the media and entertainment segment has recorded its highest bookings year to date. The company also anticipates substantial revenue contributions from its new iDEMS products in the public sector, which is projected to grow between 40-50% year-over-year. Veritone is leveraging resellers to achieve this growth.
Despite the positive developments, challenges remain in the software turnaround and public sector growth. The analyst from Roth/MKM suggests that the first half of 2024 will continue to face headwinds, but the latter half could mark the end of the transition phase.
Improved revenue visibility and additional cost savings are anticipated, but the firm awaits more stable annual recurring revenue figures before adopting a more constructive stance on Veritone shares. The new price target reflects a revenue multiple of approximately 1.7 times the projected FY24 revenue of roughly $137.5 million.
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