The digital advertising industry is projected to reach over $740 billion in 2024 as companies spend on digital, search, and social media platforms at a compound annual growth rate of 8.9%. Integral Ad Science (NASDAQ:IAS), a technology company that analyzes the value of digital advertising placements, looks to grow amid these market dynamics. Despite shedding a third of its value (the shares are down 38% year-to-date), the stock still looks relatively overvalued. A recent revenue beat is a step in the right direction, but investors may want to see more good news before taking action.
IAS Expands Across Social Media & Video
Integral Ad Science is a media measurement and optimization platform that delivers independent measurement and verification of digital advertising across all devices, channels, and formats, including desktop, mobile, connected TV, social, display, and video. Across social media, the company recently launched its AI-driven Total Media Quality brand safety and suitability measurement product on Facebook, Instagram, and TikTok.
This was supplemented by an extension to include GARM-aligned misinformation measurement capability. IAS extended its partnership with Snap in March, becoming the first AI-driven brand safety and suitability measurements provider for advertisers on this platform.
Within video, the company has recently collaborated with Netflix and can now provide CTV attention measurement with IAS Quality Attention to show the effectiveness of Netflix’s ad-supported attention metrics. IAS also earned MRC accreditation for its integrated third-party calculation and reporting of YouTube video viewability in March and another certification for the filtration of sophisticated invalid traffic in CTV environments in April.
Analysis of IAS’s Recent Financial Performance
IAS recently reported Q1 financial results. Revenues totaled $114.53 million, surpassing expectations by $2.39 million and reflecting a 7.9% year-on-year increase. A net loss of $1.3 million, or -$0.01 per share, was a decline from net income of $3.1 million, or $0.02 per share, in the prior-year period, though in line with estimates.
The firm finished the quarter with cash and cash equivalents of $83.9 million. Notably, it reduced long-term debt by $30 million to $125 million, leaving a net debt of $41 million at the end of Q1.
The company expects Q2 revenues to range from $125 to $127 million, with consensus projections of $124.19 million. For FY 2024, IAS has revised its revenue outlook to $533 and $541 million, exceeding consensus expectations of $532.1 million.
What Is the Price Target for IAS Stock?
Analysts following IAS have mainly been cautiously optimistic about the stock. For instance, Raymond James analyst Andrew Marok recently lowered the price target on the shares from $16 to $13 while maintaining an Outperform rating. He noted that Q1 results came in solidly ahead of expectations and that the company’s pipeline of opportunities was strong.
Overall, Integral Ad Science is rated a Strong Buy based on the aggregate recommendations and 12-month price targets assigned by 15 Wall Street analysts over the past three months. The average price target for IAS stock is $16.77, which represents a 71.47% upside from current levels.
The stock has been range-bound for the past month and trades at the low end of its 52-week price range of $7.98-$20.88. The shares look to be relatively richly valued, with a P/S ratio of 3.27x sitting well above the Advertising Agency industry average of 0.9x and the Communications Services sector average of 2.6x.
Investors May Want to Give IAS More Time before Investing
Integral Ad Science has attractive characteristics. It continues to expand its footprint within a dynamically growing market, which has led to an increase in revenues. In addition, its pipeline points to further upside potential. However, the stock lacks positive price momentum and looks to be on the expensive side of things. As a result, investors may want to give the company a little more time to deliver more positive news that can help build a case for investing at current levels.
