TechTarget's Struggles And Potential: Analyst Analyzes Revenue Estimates And Growth Prospects

KeyBanc Capital Markets analyst Justin Patterson reiterated an Overweight rating on the shares of TechTarget, Inc. TTGT, lowering the target price to $35 from $50, reflecting a lower EBITDA outlook.
Flagging multiple signs of softness across the overall IT landscape, the analyst's new estimates for 2023 assume no growth when compared to the levels of the recently reported the first quarter of FY23.
Businesses that produce content are viewed as facing threats from AI (e.g., consumers will go straight to ChatGPT over websites), the analyst notes.
Patterson believes that it may take "a more stable macro" to show that AI is not disrupting the business of TechTarget.
In the recently-reported Q1, the company's 2023 revenue guidance was lowered from $260 million - $265 million to $225 million - $230 million, a decline of ~13% at the midpoint.
Due to the lower revenue outlook, the analyst reduced 2023 adjusted EBITDA estimates by $23 million to $67 million. For FY24, adjusted EBITDA is reduced by $22 million to $81 million.
Patterson has also decreased 2023 and 2024 revenue estimates by 13% and 20%, respectively.
However, share repurchases and M&A are likely to support the stock going ahead.
In addition, product innovation and an eventual macro recovery will drive a return to healthy growth and margin expansion.
Price Action: TTGT shares are trading high by 3.69% to $31.43 on the last check Monday.

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