DoubleVerify(NYSE: DV) shareholders are a sturdy lot; they were already having a tough time even before Monday's monster tech stock sell-off. The company's shares were caught up in the general rout, and this was compounded by an analyst's price target cut. When the smoke cleared, DoubleVerify's stock closed the day more than 5% lower. This was worse than the performance of the S&P 500 index, which "only" declined by 3%.
10%-plus price target cut
Before market open, Baird's Vikram Kesavabhotla reduced his price target on DoubleVerify to $30 per share from his previous $34. This doesn't quite make him a DoubleVerify bear, though, as despite the cut he maintained his outperform (i.e., buy) recommendation.
The motives behind Kesavabhotla's more than 10% trimming weren't immediately clear. Yet it doesn't seem coincidental that the price target cut came less than a week after DoubleVerify published its second-quarter results.
While these indicated encouraging growth in certain areas -- such as revenue, which rose by 17% year over year to almost $156 million -- the company's profitability left much to be desired. First, it slid by a vertigo-inducing 41% to $7.5 million; second, it didn't come close to the consensus analyst estimate. The revenue guidance management proffered largely met but did not exceed prognosticator projections.
Time to go contrary?
DoubleVerify is a young company in a hot segment (digital ad services), so investors are expecting it to at least come close to analyst estimates. That said, it isn't hard to disappoint the market these days, and the company isn't doing badly -- in some ways it's a victim of high expectations. The current share price weakness, then, could be a decent opportunity to load up on the stock.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoubleVerify. The Motley Fool has a disclosure policy.
