With a surge in social media usage in recent years, the content creator economy is thriving. Amid this growth, Vimeo, Inc. (VMEO) seems to be well-positioned to capitalize on the sector’s growing momentum.
With more than 5.24 billion people currently using social media worldwide, the digital content creation market has never seen better days. Platforms like YouTube, Instagram, TikTok, and Twitch, which provide tools and spaces for creators to share their videos, podcasts, art, and other content, have become the preferred entertainment choice for the current generation.
In this booming creator landscape, VMEO stands out with its wide range of creator tools and video-sharing platform. The company reported serving over 190 countries, with 45% of its revenue coming from outside the United States. Moreover, the company also showcased robust growth in its Enterprise bookings and OTT/Streaming business.
That being said, VMEO’s stock has climbed 11.8% over the past six months and 45.8% over the past year, closing its last trading session at $5.79.
Now, let us discuss the factors that could affect the stock’s growth trajectory.
Recent Developments
On October 23, 2024, VMEO announced the launch of its groundbreaking app for Apple Vision Pro. This free app brings viewers into the content and enables users to view, upload, and share their spatial videos with others to enjoy.
With the ability to add remarkable depth and dimension to a scene, spatial video offers a more engaging and immersive experience for both personal and professional use cases. The launch showcases the company’s vision to push the boundaries of video experiences. This move could enhance the company’s position in the booming AR/VR market.
Last year, the company launched its AI-powered video translation solution. Using GenAI to translate video, audio, and captions into different languages, the new release reduces the time and cost associated with traditional translation offerings.
Coming with different use cases, including learning and development, employee communication, and marketing, the new solution could dramatically streamline business processes.
Sound Financials
For the fiscal 2024 fourth quarter that ended December 31, 2024, VMEO’s revenue amounted to $103.16 million. Its non-GAAP gross profit was reported to be $80.40 million. Additionally, the company’s net earnings and EPS amounted to $1.54 million and $0.01, respectively.
As of December 31, 2024, VMEO’s cash and cash equivalents amounted to $325.28 million, compared to $301.37 million on December 31, 2023.
Mixed Analyst Estimates
For the fiscal 2025 first quarter (ending in March), analysts expect VMEO’s revenue to decline 3.2% year-over-year to $101.57. The company has surpassed the consensus revenue estimates in each of the four trailing quarters, which is noteworthy.
Looking ahead, its revenue for the fiscal 2025 second quarter (ending in June) is expected to rise marginally year-over-year to $104.83 million. However, its EPS for the same period is forecasted to decline 91.7% year-over-year to $0.01.
High Profitability
VEMO's trailing 12-month gross profit margin of 78.26% is 49.6% higher than the industry average of 52.33%. Its trailing 12-month net income margin stands at 6.48%, 75% higher than the industry average of 3.70%.
In addition, the company boasts a trailing 12-month levered FCF margin of 11.33%, which is 30.6% higher than the sector average of 8.67%. Also, the stock's trailing 12-month asset turnover ratio of 0.66x outperforms the industry average of 0.49x by 34.1%.
Discounted Valuation
VMEO is currently trading at a forward EV/Sales of 1.32x, which is 34.2% lower than the industry average of 2.00x. This indicates that VMEO is undervalued compared to the broader market, offering potential upside for investors.
POWR Ratings Reflects Optimism
VMEO’s sound fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by taking into account 118 different factors, with each factor weighted to an optimal degree.
VMEO has a B grade Quality, showcased by its higher-than-average profitability metrics. Plus, the stock holds a B grade for Value, driven by its discounted valuation metrics relative to the industry average.
Within the A-rated Software - SAAS industry, VMEO is ranked #9 out of 18 stocks. Beyond what is stated above, we have also given VMEO grades for Momentum, Sentiment, Stability, and Growth. Get all VMEO ratings here.
Bottom Line
Driven by software releases that are actively enhancing tools for content creators, VMEO's position in the competitive video platform market seems robust. The launch of an app for Vision Pro could facilitate its growth in the AR/VR market, whereas its AI-driven translation tools could boost the company's business operations-related offerings.
Coupled with robust financials, discounted valuation, and high profitability, the stock could be an excellent addition to one’s portfolio.
How Does Vimeo, Inc. (VMEO) Stack Up Against Its Peers?
Although VMEO’s near-term outlook appears sound, it may be worthwhile to explore its industry peers, who also exhibit even stronger POWR Ratings. So, consider these A (Strong Buy) rated stocks from the Software - SAAS industry:
DocuSign, Inc. (DOCU)
Kaltura, Inc. (KLTR)
WM Technology, Inc. (MAPS)
To explore more A or B-rated Software - SAAS stocks, click here.
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VMEO shares rose $0.05 (+0.86%) in premarket trading Wednesday. Year-to-date, VMEO has declined -9.53%, versus a 1.39% rise in the benchmark S&P 500 index during the same period.
About the Author: Aritra_Gangopadhyay
Aritra is a financial journalist dedicated to breaking down complex financial topics into simple, actionable insights. Holding a Master’s degree in Economics, he uses his analytical expertise to help investors uncover unique opportunities for long-term success.
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