CS Disco’s Strategic Growth and Profitability Path Bolsters Buy Rating

CS Disco (LAW – Research Report), the Technology sector company, was revisited by a Wall Street analyst yesterday. Analyst David Hynes from Canaccord Genuity maintained a Buy rating on the stock and has a $9.00 price target.

David Hynes has given his Buy rating due to a combination of factors related to CS Disco’s recent performance and strategic positioning. The company reported its fourth-quarter revenue at the upper limit of its guidance and demonstrated better-than-expected EBITDA losses. Importantly, CS Disco achieved free cash flow profitability for the second consecutive fourth quarter and maintains a strong cash position, which provides a buffer as it targets profitability by the end of 2026.
The growth in large customer accounts, particularly those spending over $100K annually, which now comprises more than 75% of Disco’s revenue, is a positive indicator of customer engagement. Additionally, the adoption of Disco’s AI products, such as Cecilia Q&A, reflects promising early utilization. The company’s ongoing efforts in realigning its go-to-market strategy, including refining customer focus and optimizing sales incentives, are expected to support future growth. Despite the challenges of forecasting within a usage-based revenue model, the business is poised for potential double-digit growth, making the stock undervalued at its current EV/R multiple. These factors contribute to maintaining a valuation-based Buy rating.

In another report released today, Needham also maintained a Buy rating on the stock with a $8.00 price target.

Based on the recent corporate insider activity of 47 insiders, corporate insider sentiment is negative on the stock. This means that over the past quarter there has been an increase of insiders selling their shares of LAW in relation to earlier this year.