Doximity Inc is well-positioned to meet and exceed expectations for fiscal 2024 after the online networking service for medical professionals cut its guidance and messaged slower growth, according to analysts at Bank of America.
With "no more shoes to drop," the analysts have upgraded the stock to 'Neutral' from 'Underperform' and lifted their price objective to $29 from $21.
Doximity's shares were up 2% at $28.60 in early Tuesday afternoon trade.
Since cutting its guidance, the analysts noted that Bloomberg consensus has reset from greater than 20% revenue growth through FY26 to roughly 11%, which they said should prove more than achievable.
The valuation, too, has reset from 25-30x to a more acceptable 22x EBITDA.
"We think earnings expectations have been appropriately reset and pharma manufacturer budgets could begin to improve over the next year as pressure from higher interest rates begins to ease," the analysts wrote in a client note.
"Additionally, DOCS' last earnings report combined w/ takeaways from our previously published advertising survey further support our view that Doximity's competitive positioning remains strong, albeit against a challenging macro."
The new price target reflects peer group multiple expansion and an incrementally more positive view on Doximity's competitive positioning, they added.
The analysts noted that macro headwinds affecting pharmaceutical advertisers have been well-known since mid-2022, and the consensus anticipates no significant improvement. However, they said Doximity is well-positioned to meet and potentially exceed expectations in FY24, with the bar for FY25 seen as achievable, even if the initial guide is slightly conservative.
"The two key positive takeaways from our previously published survey were: 1) Doximity is capturing more spend than any of its competitors; and 2) Doximity's engagement levels with physicians is improving. These two conclusions dispute the idea that DOCS platform relevance is weakening," the analysts wrote.
"Taken with DOCS recent earnings and updated guidance, we have greater conviction that slower growth is more related to a challenging macro environment than competitive disruption."