Truist cuts Shutterstock stock rating to Hold on merger uncertainty

Tuesday, Truist Securities adjusted its rating on Shutterstock stock (NYSE:SSTK), moving from Buy to Hold, in the wake of the company's fourth-quarter earnings report and the upcoming merger with Getty Images. Truist's decision reflects concerns over the lack of financial guidance for 2025 and the performance of Shutterstock's stock, which has declined 46% over the past year to $22.80. According to InvestingPro analysis, the stock appears undervalued at current levels.

Shutterstock's fourth-quarter results fell short of Wall Street's expectations, primarily due to foreign exchange headwinds. However, when excluding these factors, the company's revenue and adjusted EBITDA for the full year 2024 met the mid-point of management's guidance. The company generated $902 million in revenue, with a solid 58% gross profit margin. InvestingPro data shows the company maintains healthy EBITDA of $144 million, demonstrating operational efficiency despite market challenges. Two key InvestingPro Tips highlight management's aggressive share buybacks and five consecutive years of dividend increases, with eight more exclusive insights available to subscribers.

Despite these positive aspects, Truist Securities expressed reservations about Shutterstock's current position. The firm cited the pending merger with Getty Images, for which there is no current rating (NR), as a reason for the downgrade. The lack of clear guidance for the future, particularly in the context of the merger, has led to a cautious stance from the analysts.

Shutterstock's management has continued to implement shareholder-friendly actions, maintaining an active stock buyback program and issuing dividends. Nevertheless, the company's stock price has shown muted performance, prompting Truist Securities to adopt a more neutral outlook.

In summary, Truist Securities' downgrade of Shutterstock stock to Hold is based on concerns about the forthcoming merger with Getty Images and the absence of financial forecasts for 2025, despite Shutterstock's solid growth and profitability metrics in the past year.

In other recent news, Shutterstock reported record revenues of $251 million for the third quarter of 2024, marking a 7.4% increase from the previous year. The company's growth was driven by its focus on AI-generated content and the strategic acquisition of Envato, which contributed an additional $38 million to content revenue. Shutterstock has raised its full-year revenue guidance to between $935 million and $940 million. In another development, Needham analysts maintained a Buy rating on Shutterstock, despite lowering the price target from $55 to $45. This adjustment reflects cautious optimism surrounding the merger between Shutterstock and Getty Images, expected to enhance content offerings and generate cost savings. The merger is anticipated to create significant free cash flow, with a focus on debt reduction. Additionally, Shutterstock declared a dividend of $0.33 per share, reinforcing its commitment to returning value to shareholders. These developments highlight Shutterstock's ongoing strategic initiatives and financial performance.

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