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Direct Digital Holdings (DRCT)
NASDAQ:DRCT
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Direct Digital Holdings
(NASDAQ:DRCT)
40Underperform
Positive Factors
Cost Management
Management continues to evaluate costs judiciously, finding a healthy baseline with potential for further reductions.
Guidance
Reiteration of guidance despite macro uncertainty provides incremental confidence in Direct Digital's outlook.
Revenue Growth
Management reiterated their prior FY25 revenue guidance, which at least suggests some confidence despite the pervading macro questions.
Negative Factors
Macro Challenges
4Q24 revenue of $9.1 million was a bit worse than anticipated, as macro trends caught up with Direct, creating an incredibly challenging environment.
Profitability Pressure
Profitability is expected to remain under pressure until DRCT returns to a $25-30M quarterly run rate in revenue and improved SS gross margins.
Visibility Concerns
There is a little bit of extra worry as the scale event is expected in the second half, where visibility is unclear.
Direct Digital Holdings (DRCT) vs. S&P 500 (SPY)
Market Cap
$9.60M
Dividend YieldN/A
Average Volume (3M)2.15M
Price to Earnings (P/E)―
Beta (1Y)1.43
Revenue Growth-69.54%
EPS Growth-19665.56%
CountryUS
Employees79
SectorCommunication Services
Sector Strength84
IndustryAdvertising Agencies
Share Statistics
EPS (TTM)-0.35
Shares Outstanding8,113,480
10 Day Avg. Volume1,327,596
30 Day Avg. Volume2,152,432
Financial Highlights & Ratios
PEG Ratio<0.01
Price to Book (P/B)-0.78
Price to Sales (P/S)0.00
P/FCF Ratio-1.24
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$6.00Price Target Upside1076.47% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
Direct Digital Holdings Business Overview & Revenue Model
Company DescriptionDirect Digital Holdings, Inc. operates as an end-to-end full-service programmatic advertising platform. The company's platform primarily focuses on providing advertising technology, data-driven campaign optimization, and other solutions to underserved and less efficient markets on both the buy- and sell-side of the digital advertising ecosystem. It serves various industry verticals, such as travel, healthcare, education, financial services, consumer products, etc. with focus on small- and mid-sized businesses. The company was founded in 2018 and is headquartered in Houston, Texas.
How the Company Makes MoneyDirect Digital Holdings generates revenue primarily through its programmatic advertising services, where it acts as an intermediary between advertisers and publishers. The company earns money by taking a percentage of the advertising spend that flows through its platform. Additionally, DRCT offers data-driven marketing solutions, providing clients with insights and analytics to enhance their advertising strategies, which also contributes to its revenue. Significant partnerships with advertisers, agencies, and media companies further bolster its earnings, as these relationships expand its network and increase the volume of transactions processed through its platform.
Direct Digital Holdings Financial Statement Overview
Summary
Direct Digital Holdings faces significant financial challenges, with declining revenues, negative profitability margins, and high leverage. Negative stockholders' equity and inconsistent cash flows highlight the need for financial restructuring.Income Statement
Direct Digital Holdings has shown a volatile revenue trajectory with a significant decline in revenue from 2023 to 2024. Gross profit margins have decreased, and both EBIT and EBITDA margins are negative, highlighting operational inefficiencies. The company has also experienced consistent net losses over the years, with a particularly large net loss in 2024.45
Neutral
Balance Sheet
The balance sheet reveals high leverage, with a negative stockholders' equity in recent years, indicating potential solvency issues. The debt-to-equity ratio is concerning, as the company has been operating with negative equity. The equity ratio has also turned negative, reflecting high financial risk.30
Negative
Cash Flow
Cash flow from operations has been inconsistent, with a negative free cash flow in 2024, reflecting cash management challenges. However, the company had a positive operating cash flow in 2023, indicating some ability to generate cash from core operations. Free cash flow to net income ratio is negative, aligning with the net losses.50
Neutral
| Breakdown | |||||
| TTM | Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 94.22M | 62.29M | 157.11M | 88.04M | 38.14M | 12.48M | Gross Profit |
| 18.41M | 17.39M | 37.57M | 28.00M | 18.43M | 5.17M | EBIT |
| -8.49M | -13.23M | -2.19M | 6.66M | 4.38M | 526.30K | EBITDA |
| -293.93K | -13.23M | 473.00K | 9.85M | 6.34M | 457.44K | Net Income Common Stockholders |
| -5.28M | -19.91M | -2.19M | 2.92M | -1.51M | -908.19K |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 3.33M | 1.45M | 5.12M | 4.05M | 4.68M | 1.61M | Total Assets |
| 52.77M | 26.01M | 70.67M | 56.81M | 36.00M | 30.70M | Total Debt |
| 34.71M | 4.67M | 30.95M | 24.56M | 20.82M | 13.37M | Net Debt |
| 31.37M | 3.23M | 25.84M | 20.51M | 16.13M | 11.76M | Total Liabilities |
| 58.56M | 45.74M | 74.35M | 53.01M | 36.37M | 28.33M | Stockholders Equity |
| -5.79M | -19.73M | 543.00K | 3.79M | -374.86K | 2.37M |
| Cash Flow | Free Cash Flow | ||||
| -8.96M | -8.65M | 2.38M | 1.44M | 3.75M | -574.53K | Operating Cash Flow |
| -8.95M | -8.65M | 2.56M | 2.13M | 3.75M | -574.53K | Investing Cash Flow |
| -58.02K | -17.00K | -178.00K | -687.96K | 0.00 | -10.99M | Financing Cash Flow |
| 7.62M | 4.99M | -1.31M | -2.08M | -678.72K | 12.29M |
Direct Digital Holdings Technical Analysis
Negative
0.51
Price Trends
0.69
Negative
1.06
Negative
1.68
Negative
Market Momentum
-0.04
Positive
40.58
Neutral
8.58
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DRCT, the sentiment is Negative. The current price of 0.51 is below the 20-day moving average (MA) of 0.66, below the 50-day MA of 0.69, and below the 200-day MA of 1.68, indicating a bearish trend. The MACD of -0.04 indicates Positive momentum. The RSI at 40.58 is Neutral, neither overbought nor oversold. The STOCH value of 8.58 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for DRCT.
Direct Digital Holdings Risk Analysis
Direct Digital Holdings disclosed 55 risk factors in its most recent earnings report. Direct Digital Holdings reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Direct Digital Holdings Peers Comparison
Overall Rating
UnderperformOutperform
Sector (60)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
60 Neutral | $14.09B | 6.90 | -3.35% | 3.68% | 2.44% | -36.27% | |
56 Neutral | $23.63M | ― | -12.15% | ― | 17.04% | -2188.42% | |
55 Neutral | $75.51M | ― | -16.55% | ― | -2.67% | 21.65% | |
41 Neutral | $43.83M | ― | -123.16% | ― | -15.07% | 33.40% | |
40 Underperform | $9.60M | ― | -320.07% | ― | -69.54% | -19665.56% | |
38 Underperform | $3.53M | ― | -75.89% | ― | -49.52% | -86.35% |
* Communication Services Sector Average
Performance Comparison
DRCT
Direct Digital Holdings
0.53
-3.15
-85.60%
CNET
ZW Data Action Technologies
1.53
-1.63
-51.58%
MCHX
Marchex
1.72
0.38
28.36%
FLNT
Fluent
2.12
-1.27
-37.46%
BAOS
Baosheng Media Group Holdings
2.47
-1.09
-30.62%
SWAG
Stran & Company
1.24
0.09
7.83%
Direct Digital Holdings Earnings Call Summary
Earnings Call Date:May 06, 2025
(Q1-2025)
| % Change Since: -42.05%|
Next Earnings Date:Aug 07, 2025
Earnings Call Sentiment Negative
The earnings call highlighted some positive developments such as growth in buy-side revenue and successful cost-cutting measures. However, these were overshadowed by a significant decline in sell-side revenue, overall revenue, and increased net losses, largely due to past disruptions. The company remains optimistic about future growth, maintaining full-year revenue guidance, but faces challenges in recovering from the previous year's setbacks.Q1-2025 Updates
Positive Updates
Buy-Side Revenue Growth
Buy-side segment revenue increased by 6% compared to Q1 2024, driven by $1.2 million growth from customers in new verticals.
Operating Expense Reduction
Operating expenses were reduced by 19%, approximately $1.5 million, compared to Q1 2024 due to cost-saving measures and staff reductions.
Gross Margin Improvement
Gross margin increased to 29% in Q1 2025 from 22% in Q1 2024, due to a shift towards higher-margin buy-side revenue.
Maintained Revenue Guidance
The company maintained its full-year revenue guidance of $90 million to $110 million, expecting growth in both buy-side and sell-side segments.
New Client Additions
Several clients were added across new verticals, expected to generate an additional $5 million to $10 million in revenue in 2025.
Negative Updates
Significant Decrease in Sell-Side Revenue
Sell-side revenue decreased to $2 million in Q1 2025 from $16.5 million in Q1 2024, primarily due to business disruption from a discredited blog post against Colossus SSP.
Overall Revenue Decline
Consolidated revenue decreased to $8.2 million in Q1 2025 from $22.3 million in Q1 2024, driven by a significant drop in sell-side revenue.
Increased Net Loss
Net loss increased to $5.9 million or $0.35 per share in Q1 2025, compared to a net loss of $3.8 million or $0.22 per share in Q1 2024.
Adjusted EBITDA Loss
Adjusted EBITDA in Q1 2025 was a loss of $3 million compared to an adjusted EBITDA loss of $1.7 million in Q1 2024.
Company Guidance
During the first quarter of 2025, Direct Digital Holdings focused on scaling its buy-side solution and rebuilding its sell-side business to drive revenue growth. The company reported consolidated revenue of $8.2 million, with $6.1 million from the buy-side segment, marking a 6% increase from the previous year, mainly due to a $1.2 million increase from new verticals. The sell-side segment recorded $2 million in revenue, consistent with the previous quarter, despite challenges from a market discredited blog post in 2024 impacting partnerships. Operating expenses were reduced by approximately $1.5 million, or 19%, compared to the first quarter of 2024. Direct Digital Holdings maintained its full-year revenue guidance of $90 million to $110 million, anticipating stronger gains in the second half of the year from new sell-side partnerships.Direct Digital Holdings Corporate Events
Delistings and Listing ChangesPrivate Placements and FinancingRegulatory Filings and Compliance
Direct Digital Holdings Faces Nasdaq Non-Compliance Notice
Negative
May 16, 2025
On May 12, 2025, Direct Digital Holdings, Inc. received a notice from Nasdaq indicating non-compliance with the minimum bid price requirement, as its Class A common stock was below $1.00 per share for 30 consecutive business days. The company has until November 10, 2025, to regain compliance, potentially through a reverse stock split, or face delisting. Additionally, between May 13 and May 16, 2025, the company sold 1,100,000 shares of Class A Common Stock for $570,924, exceeding five percent of the total shares issued and outstanding, in transactions with New Circle Principal Investments LLC.
The most recent analyst rating on (DRCT) stock is a Buy with a $7.50 price target. To see the full list of analyst forecasts on Direct Digital Holdings stock, see the DRCT Stock Forecast page.
Spark’s Take on DRCT Stock
According to Spark, TipRanks’ AI Analyst, DRCT is a Neutral.
Direct Digital Holdings is facing substantial financial and operational challenges. The significant decline in revenue, negative profitability, and high leverage are major concerns. While there are positive signs in cost-cutting and buy-side revenue growth, the overall financial health is weak. The technical indicators suggest a bearish trend, and the company’s valuation is unattractive due to negative earnings. Despite maintaining optimistic guidance, the recovery from past disruptions remains uncertain, resulting in a low overall score.
To see Spark’s full report on DRCT stock, click here.
Private Placements and Financing
Direct Digital Holdings Sells 2.3 Million Shares
Neutral
May 13, 2025
Between April 8, 2025, and May 13, 2025, Direct Digital Holdings sold 2,300,000 shares of its Class A Common Stock for a total of $1,387,015 after discounts. This sale exceeded five percent of the total shares outstanding as of April 8, 2025, and was conducted with New Circle Principal Investments LLC under a Share Purchase Agreement, relying on exemptions from registration requirements under the Securities Act.
The most recent analyst rating on (DRCT) stock is a Buy with a $7.50 price target. To see the full list of analyst forecasts on Direct Digital Holdings stock, see the DRCT Stock Forecast page.
Spark’s Take on DRCT Stock
According to Spark, TipRanks’ AI Analyst, DRCT is a Neutral.
Direct Digital Holdings is facing substantial financial and operational challenges. The significant decline in revenue, negative profitability, and high leverage are major concerns. While there are positive signs in cost-cutting and buy-side revenue growth, the overall financial health is weak. The technical indicators suggest a bearish trend, and the company’s valuation is unattractive due to negative earnings. Despite maintaining optimistic guidance, the recovery from past disruptions remains uncertain, resulting in a low overall score.
To see Spark’s full report on DRCT stock, click here.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.