With the emergence of artificial intelligence (AI), businesses are in a race to integrate the technology successfully. One firm having a good run and is drawing attention for its leadership in this area is DoubleVerify Holdings (DV), a tech firm offering data analytics and user authentication services with a primary focus on aiding advertisers in effectively reaching their target audiences.
After beating revenue estimates in the second quarter, the company continues to display promising growth due to its continuous development of AI-powered solutions for optimizing digital advertising. With expansion plans into major online platforms like Meta (META), YouTube, and TikTok, DoubleVerify appears to be an appealing growth stock with a potential upside, and could be worth a double-check.
DoubleVerify’s Bringing Scale to Ad Measurement
DoubleVerify provides a platform for digital media measurement and analytics. The company offers software that fortifies digital advertising for advertisers, protecting brands from purchasing fraudulent or inappropriate ad inventory, enhancing ad buying targeting accuracy, and measuring advertising effectiveness. Its customer base includes hundreds of Fortune 500 advertisers who utilize its data and analytics.
As video content is quickly becoming the primary way consumers engage with the internet and advertisers reach consumers, the company has developed solutions to verify that those video ad interactions are viewable, secure, and suitable. It is a growth driver for the firm, as they now measure more video impressions for client brands than display impressions, with CTV measurement impression volumes expanding by 55% year-over-year in the most recent quarter.
The shifting trends of advertising spend towards online media suggest ongoing strong demand for its services. The company estimates that digital ad spending will exceed $431 billion by 2028, growing at a CAGR of 9%.
DoubleVerify’s Recent Financial Results and Outlook
The company recently published its second-quarter financial report for 2024. Total revenue was $155.89 million, surpassing the analysts’ estimates of $153.82 million and marking a 17% year-over-year increase. Growth was seen across business lines, as activation revenue increased by 12%, measurement revenue escalated by 22%, social measurement revenue grew by 44%, and international measurement revenue increased by 29%, with a 35% growth in Europe, The Middle-East and Africa (EMEA) and a 20% increase in Asia-Pacific (APAC).
Net income was $7.5 million, and adjusted EBITDA was $46.8 million, presenting a solid 30% adjusted EBITDA margin. The company reported earnings per share of $0.18, slightly surpassing consensus estimates of $0.18.
DoubleVerify announced a repurchase authorization of $150 million in common stock and repurchased 2.7 million shares, amounting to $50 million. As of July 30, 2024, an available balance of $100 million remained for further repurchase under the company’s Repurchase Program.
Management has offered financial guidance for Q3 and FY 2024. They forecast Q3 revenue from $167 to $171 million, indicating an annual growth of 17%. Adjusted EBITDA is expected to fall between $49 to $53 million, constituting a 30% margin at the midpoint. For 2024, revenue is predicted to be around $667 to $675 million, again a 17% increase year-over-year at the midpoint. The Adjusted EBITDA is projected to be between $206 to $214 million, which reflects a 31% margin at the midpoint.
What Is the Price Target for DV Stock?
The stock has been volatile, with a beta of 1.49; it has declined over 41% in the past year. It trades at the lower end of its 52-week price range of $17.50 – $43.00, though it may be at an inflection point as it shows positive price momentum by trading above the 20-day (20.14) and 50-day (20.98) moving averages. The stock appears to trade at a discount to industry peers, with a P/E ratio of 56.16x, comparing favorably to the Software Application industry average of 62.1x.
Analysts following the company have mainly been constructive on the stock. For instance, Macquarie analyst Tim Nollen recently reiterated a Buy rating with a $25 price target on the shares, noting the positive Q2 report, strong growth in social and CTV segments, and the recent closure of Oracle’s Moat ad business accelerating opportunities for DoubleVerify to capture new clients.
DoubleVerify Holdings is rated a Moderate Buy based on the recommendations and price targets assigned by 18 analysts. The average price target for DV stock is $28.92, representing a potential upside of 36.93% from current levels.
Bottom Line on DV
DoubleVerify has emerged as a digital advertising industry leader with pioneering AI solutions. The company’s recent Q2 financial report exceeded analysts’ estimates, and with projected online media ad spending increasing, so does the likely demand for DoubleVerify’s services. The company is well-positioned to participate in the industry’s continuous growth, making the stock an attractive option trading at a reasonable valuation.
