Tuesday, May 7, 2024 – Canaccord Genuity has increased the price target for EverQuote (NASDAQ:EVER) to $30 from $25 while retaining a Buy rating on the stock. The adjustment follows EverQuote's first-quarter results, which surpassed expectations across key financial metrics.
EverQuote reported a robust first quarter with revenues, Variable Marketing Margin (VMM), and adjusted EBITDA all exceeding Canaccord Genuity's estimates.
This performance is attributed to a sustained recovery in auto insurance spending, which has been expanding, as evidenced by all top 10 carriers from the previous quarter upping their expenditure, particularly the most aggressive one, believed to be Progressive. The increased spending has led Auto revenue to its highest point since the same quarter last year and has set the stage for second-quarter guidance to mirror the levels seen in the first quarter of 2023.
The company's management anticipates that EverQuote is at the beginning of a multi-year recovery phase in the Auto segment. However, they also acknowledge the possibility that some spending may have been accelerated into the second quarter. It is noted that the largest carrier customers are already highly active across most states, which may lead to a slight dip in Auto revenue in the second half of the year compared to the first.
Despite this, the forecast is for EverQuote to maintain an adjusted EBITDA margin around or above pre-downturn levels of approximately 6%.
Highlighting the company's financial health, EverQuote generated $11 million in cash during the quarter, closing the period with $49 million in cash reserves. Additionally, the company reported positive net income in what is typically a seasonally profit-challenged quarter. Reflecting on historical performance, after the last challenging market period in 2014-2015, EverQuote's auto revenue grew significantly from around $119 million in 2017 to $330 million in 2021.
While current estimates remain conservative, Canaccord Genuity sees similar growth potential for EverQuote in the ongoing cycle.
InvestingPro Insights
Following Canaccord Genuity's optimistic outlook on EverQuote, it's worth considering the latest metrics and analyst insights from InvestingPro. EverQuote boasts a striking gross profit margin of 92.2% for the last twelve months as of Q4 2023, indicating strong efficiency in their operations. Additionally, the company has seen a remarkable one-year price total return of 224.13% as of the most recent data, reflecting a significant investor confidence in the stock.
InvestingPro Tips highlight EverQuote's ability to hold more cash than debt, with a cash reserve closing at $49 million, which is a promising sign of financial stability. Moreover, analysts predict the company will be profitable this year, which aligns with the positive net income reported in the typically challenging first quarter. For those looking to delve deeper into EverQuote's financials and future prospects, InvestingPro offers an array of additional tips, with 12 more listed in their full analysis. Interested readers can unlock these insights and benefit from a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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