While the pandemic negatively affected many businesses and their growth, Vimeo was not one of them. Vimeo’s growth accelerating during the pandemic as well as their video adoption, leading analysts to believe that the corporation is well positioned for future growth, but not enough to get the Buy rating.
J.P. Morgan’s analyst Cory A Carpenter has taken particular interest in VMEO stock, weighing the risk/reward balance that the company is currently positioned in.
Vimeo is a leading video software solution that allows SMBs and enterprises to do many tasks – create, collaborate and communicate – with video on one platform. The company currently has over 200M registered users in over 190 countries with 1.6M paying subs. What differentiates VMEO is that width of its platform which acts as a “one-stop shop” for SMBs.
Currently, Vimeo is trading at 15x 2022E revenue, and Carpenter believes that multiple expansion could be challenging in the upcoming future as growth moderates on tough comps. There is also potential for profit downgrades “as investments ramp across R&D and sales.”
Carpenter explains “Vimeo estimates the global video solutions TAM will reach $70B in 2024 (vs. $40B in 2021), comprising SMBs ($25B) and enterprises ($45B). This assumes 100M addressable SMBs (vs. 348M global SMBs) at an ARPU of $250 (vs. $168 in 4Q20) and 1M addressable enterprises at an ARPU of $45k (vs. $22k+ in 4Q20). We believe this TAM could prove conservative—there are 200M+ businesses utilizing FB tools and 30M+ paying website builder subs across GoDaddy, Squarespace, and Wix.”
After launching in 2019, Vimeo enterprise quickly scaled to $64M in revenue in 2020, which was 23% of their total revenue, and included 100%+ growth in each of the past 3 quarters. Vimeo has more than doubled sales in 2021 to support this enterprise growth. This data has largely been reactive to inbounds.
Data shows that about 70% of new enterprise subs start as free or self-serve and over 65% of Fortune 500 companies have at least one paid Vimeo account. Vimeo is currently focused on expanding use cases with early signs of success and net revenue retention of over 110% in the past 3 quarters.
While growth is seen in the future, Carpenter rates this stock as a Hold with a price target of $50.00 and a 13.20% Upside.
The Street is split almost in half on this, with 7 ratings, 4 saying Buy and 3 saying Hold. The current market price is $45.03 with an average price target of $53.67 and ~19% upside.
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