By John Jannarone
Shares of Direct Digital Holdings, Inc. (Nasdaq: DRCT) surged as much as 50% Friday morning after the company raised guidance and multiple brokers announced higher price targets on the stock.
Direct Digital Holdings, which brings together media owners such as news websites with advertisers seeking to buy placements marketing goods and services, said it expects 2023 revenue to be in the range of $170 million to $190 million, or 101% year-over-year growth at the mid-point.
“In recent quarters, we have made significant investments in our technology stack, advertising platform and operational structure. We initially expected to see the impact of these investments in 2024, however, we are pleased to report that these benefits have arrived much earlier in 2023,” said Mark D. Walker, Chairman and Chief Executive Officer. “Our strong technology partnerships and our overarching business strategy have enabled us to meet a growing number of customers’ demands and further the capabilities of our sell-side technology platform. On both the sell-side and the buy-side, increased spend from our buying partners has resulted in an associated increase in our impression count and organic growth profile with a direct positive impact on net income and adjusted EBITDA.”
Multiple brokers see much more upside in the stock and raised price targets. Roth MKM raised the firm’s price target on Direct Digital to $9.50 from $4.75 and kept a Buy rating on the shares. Benchmark raised its price target to $15 from $12 a share.
“While we have come to expect relative outperformance on the print given past quarters and apparent continued momentum, we think this quarter marks a next level for the Company that seems to be bucking every major trend, both within the peer group and from a relevant macro perspective,” Benchmark analyst Daniel Kurnos said in a note to clients. “We get that it is easy to post gaudy growth rates on relatively small numbers, but almost nowhere are we hearing about smaller platforms gaining massive wallet share in an environment that continues to feature a flight to safety (and, by the way, these numbers are no longer so small).”
Direct Digital is a leading company in the world of programmatic advertising, where each impression of an Internet user is put up for sale in high-speed auctions completed in milliseconds.
For the third quarter ended Sept. 30, 2023, Direct Digital processed over 400 billion monthly impressions through its sell-side advertising segment, an increase of 220% over the same period of 2022.
IPO Edge published a detailed financial analysis of the company, which is available here.
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