Citi Upgrades Similarweb Shares to Buy, Sets Price Target at $10
In an optimistic turn for Similarweb Ltd (NYSE:SMWB), Citi has upgraded the data-as-a-service company's stock from Neutral to Buy, with a substantial increase in the price target to $10.00, up from the prior $6.00. This decision by Citi comes on the heels of Similarweb's impressive fourth-quarter performance, showcasing notable growth metrics and execution that hint at a bright future for the company in 2024.
The upgrade reflects Citi's confidence in Similarweb's ability to accelerate revenue and profitability. With the stock trading at approximately 2.1 times forward sales and demonstrating accelerating double-digit growth, the valuation remains attractive even with the new, higher price target of 2.9 times its expected 2024 enterprise value to sales.
Financial Performance and Market Position
Similarweb has shown commendable financial health in the past twelve months leading up to Q4 2023, with a revenue increase of 12.83% and a gross profit margin of 78.4%. These figures not only speak to the company's strong pricing power but also to its effective cost management. Despite its current unprofitability, with a P/E ratio of -20.13, the firm's substantial growth and robust margin outline its potential for future profitability.
Comparatively, Similarweb is positioned favorably against peers like ZoomInfo Technologies (ZI), with its revenue multiple being roughly a third of that of ZoomInfo. Citi's analysis projects that Similarweb will experience two to three times stronger revenue growth with expanding margins, suggesting a strategic Overweight position in Similarweb and an Underweight position in ZoomInfo for investors.
Market Sentiment and Investment Insights
The company's stock has been trading near its 52-week high, at 94.5% of this peak value, reflecting a positive market sentiment. This is further bolstered by a 7.85% return over the last week and a remarkable 38.46% return over the last month. Such dynamics demonstrate market confidence in Similarweb, aligning with Citi's optimistic upgrade and revised outlook.
Investors keeping an eye on Similarweb will find additional insights on InvestingPro. The platform provides further analysis and tips for making well-informed investment decisions. Alongside analyst earnings revisions and the company's moderate level of debt, this data offers a glimpse into Similarweb's promising financial landscape and growth trajectory.
As the financial sector closely watches Similarweb's progress, the upgrade and enhanced price target by Citi underscore a turning point for the company, potentially marking the beginning of an accelerating phase in its revenue and profitability profile throughout 2024. For investors, Similarweb represents an intriguing opportunity, grounded in solid financial performance and favorable market positioning, to capitalize on in the data-as-a-service sector.
Analyst comment
Positive. As an analyst, I predict that Similarweb’s market will experience a positive impact from Citi’s upgrade and increased price target. Similarweb’s strong financial performance, growth potential, and favorable market positioning suggest that it has the potential to accelerate revenue and profitability in 2024. Investors may find this a promising opportunity in the data-as-a-service sector.
