Digimarc's Shift In Strategy Is Working, Says Bullish Analyst

Shares of Digimarc Corp DMRC were climbing in early trading on Monday.

The company's strategy of shifting from providing a standalone solution to a broader platform and solutions has led to accelerating annual recurring revenue (ARR) and revenue growth, according to Needham.

The Digimarc Analyst: Joshua Reilly upgraded the rating for Digimarc from Hold to Buy, while establishing a price target of $40.

The Digimarc Thesis: The company is likely to generate strong ARR growth over the next five years, "as use cases proliferate across a range of end markets, Reilly said in the upgrade note.

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While the company has multiple products that could boost shareholder value, the current valuation only reflects a "modest value to innovations," he added.

"We believe regulation can help drive adoption of Digimarc’s Recycle platform in Europe and Canada over the next several years leading to potentially positive option value to shares," the analyst wrote. "Attractive unit economics leads to improving cash flow margin," he further stated.

DMRC Price Action: Shares of Digimarc had risen by 12.04% to $29.40 at the time of publication on Monday.

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