Direct Digital Holdings (DRCT) AI Stock Analysis

• Market Cap: $6.95M
• Dividend Yield: N/A
• Average Volume (3M): 2.66M
• Price to Earnings (P/E): ―
• Beta (1Y): 1.74
• Revenue Growth: -60.35%
• EPS Growth: -1269.03%
• Country: US
• Employees: 79
• Sector: Communication Services
• Sector Strength: 83
• Industry: Advertising Agencies
• EPS (TTM): -0.35
• Shares Outstanding: 8,121,022
• 10 Day Avg. Volume: 4,161,253
• 30 Day Avg. Volume: 2,656,631
• PEG Ratio: N/A
• Price to Book (P/B): N/A
• Price to Sales (P/S): 0.00
• Price to Cash Flow (P/CF): 0.00
• P/FCF Ratio: 0.00
• Enterprise Value/Market Cap: 3.81
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: 1.52
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: $8.00
• Price Target Upside: 809.09% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 2

Direct Digital Holdings shows substantial financial and operational challenges, with declining revenues and profitability concerns. While technical indicators are mixed, the stock's valuation remains unattractive due to negative earnings. The company has taken steps to improve cost efficiency and pursue new revenue streams, but these are yet to offset its current difficulties. The earnings call outlined potential recovery prospects, but significant risks persist.

Positive Factors

Buyside Wins

Most of the bad news is ostensibly behind the company, with some minor winds at the sails with $5-10 million of incremental buyside wins to help jumpstart the path to recovery.

Cost-saving Measures

Adjusted EBITDA could return to breakeven or better this year due to necessary cost-saving efforts.

Revenue Guidance

Management reiterated their prior FY25 revenue guidance, which at least suggests some confidence despite the pervading macro questions.

Negative Factors

Business Challenges

DRCT faces ongoing challenges across both businesses that must be resolved to enhance the visibility into DRCT’s ability to return to growth and profitability.

Customer Churn

DRCT's buy-side faces headwinds from customer churn and its team is working to replace that lost revenue and expand into other verticals like education.

Revenue Performance

4Q24 revenue of $9.1 million was a bit worse than anticipated, as macro trends caught up with Direct, creating an incredibly challenging environment.

Direct Digital Holdings Business Overview & Revenue Model

Company Description

Direct Digital Holdings (DRCT) is a technology company that operates within the digital advertising sector, focusing on facilitating efficient media buying and selling for small and mid-sized businesses. The company offers a suite of services through its proprietary platform, including programmatic advertising, data-driven marketing solutions, and media services, helping clients to optimize their advertising expenditure and maximize reach across various digital channels.

How the Company Makes Money

Direct 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.

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.

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.

Breakdown
Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement		Total Revenue
62.29M	157.11M	88.04M	38.14M	12.48M
	Gross Profit
17.39M	37.57M	28.00M	18.43M	5.17M
	EBIT
-13.23M	-2.19M	6.66M	4.38M	526.30K
	EBITDA
-13.23M	473.00K	9.85M	6.34M	457.44K
	Net Income Common Stockholders
-19.91M	-2.19M	2.92M	-1.51M	-908.19K
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
1.45M	5.12M	4.05M	4.68M	1.61M
	Total Assets
26.01M	70.67M	56.81M	36.00M	30.70M
	Total Debt
4.67M	30.95M	24.56M	20.82M	13.37M
	Net Debt
3.23M	25.84M	20.51M	16.13M	11.76M
	Total Liabilities
45.74M	74.35M	53.01M	36.37M	28.33M
	Stockholders Equity
-19.73M	543.00K	3.79M	-374.86K	2.37M
Cash Flow		Free Cash Flow
-8.65M	2.38M	1.44M	3.75M	-574.53K
	Operating Cash Flow
-8.65M	2.56M	2.13M	3.75M	-574.53K
	Investing Cash Flow
-17.00K	-178.00K	-687.96K	0.00	-10.99M
	Financing Cash Flow
4.99M	-1.31M	-2.08M	-678.72K	12.29M

Direct Digital Holdings Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 0.88
• 50DMA: Positive
• 100DMA: Negative
• 200DMA: Negative
• MACD: Negative
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For DRCT, the sentiment is Positive. The current price of 0.88 is above the 20-day moving average (MA) of 0.64, above the 50-day MA of 0.75, and below the 200-day MA of 1.85, indicating a neutral trend. The MACD of 0.03 indicates Negative momentum. The RSI at 60.49 is Neutral, neither overbought nor oversold. The STOCH value of 49.61 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for DRCT.

Direct Digital Holdings Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
SWAG	65 Neutral	$19.58M	―	-12.29%	―	8.76%	-969.71%
Sector *	59 Neutral	$13.78B	7.66	-2.74%	3.86%	2.20%	-37.62%
DRCT	47 Neutral	$6.95M	―	-320.07%	―	-60.35%	-1269.03%
FLNT	39 Underperform	$50.23M	―	-98.64%	―	-14.67%	59.39%
MCHX	38 Underperform	$65.41M	―	-14.44%	―	-3.58%	50.73%
CNET	38 Underperform	$3.68M	―	-75.89%	―	-49.52%	-86.35%

Direct Digital Holdings Corporate Events

Direct Digital Holdings Sells Shares and Rescinds Equity

Direct Digital Holdings, Inc. sold 220,000 shares of its Class A Common Stock for $182,843 to New Circle Principle Investments LLC, exceeding five percent of its total outstanding shares. Additionally, company executives Mark Walker and Keith Smith have agreed to rescind shares issued to them in 2024 related to restricted stock units, reflecting a voluntary decision that may affect their equity stakes.