Evercore ISI cuts System 1 stock target to $2 from $3

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On Tuesday, Evercore ISI adjusted its outlook on System 1 (NYSE:SST), a data-driven marketing company, reducing the price target from $3.00 to $2.00 while maintaining an In Line rating. The firm highlighted System 1’s fourth-quarter performance, which exceeded expectations due to lower operating expenses resulting from cost-cutting initiatives implemented over the year.

In the fourth quarter, System 1 reported revenues of $96.1 million, an adjusted gross profit of $37.5 million, and an adjusted EBITDA of $10 million—a 23% quarter-over-quarter increase. These figures were bolstered by the company’s efforts to streamline operations in response to economic challenges.

Despite the positive results in the fourth quarter, System 1’s management refrained from providing full-year guidance for 2024. The decision was attributed to the ongoing uncertainty in the macroeconomic landscape and a weak advertising market that has yet to show signs of a definitive recovery.

Looking ahead to the first quarter of 2024, System 1’s management has provided guidance expecting revenues between $83 million and $84 million, with adjusted gross profit anticipated to be in the range of $28 million to $30 million. Notably, the company is projecting a negative adjusted EBITDA of between $2 million and $1 million for the quarter, marking the first instance of such guidance.

The revised price target and maintained rating reflect the analyst’s view on System 1’s financial health and future outlook, taking into account both the recent performance improvements and the challenges posed by the current economic environment.

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