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Up 121% Since May, What's Behind the Surge in this Penny Stock?
Valued at $99.9 million by market cap, BuzzFeed (BZFD) is a media company that has burnt massive shareholder wealth since its initial public offering (IPO) in March 2021. Down more than 95% from all-time highs, BuzzFeed is a penny stock priced below $3 per share.
However, shares of the company are currently up 179% in 2024, and have rallied 121% since the start of May.
Let’s examine what’s behind the recent rally and whether the tech stock is a good buy right now.
Vivek Ramaswamy Owns 7.7% of BuzzFeed
In May, BuzzFeed stock surged roughly 20% in a single trading session after it was disclosed that former presidential candidate Vivek Ramaswamy owns a 7.7% stake in the company. Ramaswamy reportedly initiated a position in BuzzFeed in March, and increased his stake over the next two months. According to a regulatory filing, Ramaswamy plans to talk to BuzzFeed management about operational and strategic opportunities to maximize shareholder value.
Recently, the Pulte family also disclosed a stake in BuzzFeed, which sparked another rally in the shares last Tuesday.
The Pulte family stated, “In our opinion, the current BuzzFeed CEO, Jonah Peretti, is driving the company into the ground, and when Vivek Ramaswamy gave him a lifeboat to save his sinking ship, Peretti told him thanks anyway. This is exactly the type of hubris that needs to end in corporate America; at every turn, CEO Peretti has delivered unacceptable financial and operational performance, quarter after quarter.”
Is BuzzFeed Stock a Good Buy Right Now?
The major reason for BuzzFeed stock's underperformance is the company’s deteriorating financials. Its sales have fallen from $321.3 million in 2020 to $252.67 million in 2023. The media company reported an operating loss of $39.8 million in 2023, compared to operating income of $12.13 million in 2020.
In Q1 of 2024, BuzzFeed reported revenue of $44.8 million, down 18% year over year. Ad sales were down 22% to $21.4 million, content revenue fell by 19% to $13.1 million, and commerce and other revenue fell by 9% to $10.2 million.
The company did narrow its adjusted EBITDA (earnings before interest, tax, interest, depreciation, and amortization) loss to $11.3 million from $29.4 million in the last four quarters.
BuzzFeed claims that its flagship brand continues to lead digital media in time spent, and is positioned to extend its leadership with the integration of artificial intelligence (AI). That said, the time spent across its media platforms fell 16% to 67 million hours during the period.
For Q2 of 2024, BuzzFeed forecasts revenue between $44 million and $49 million, implying a decline of between 21% and 30% year over year. Its adjusted EBITDA is estimated between a loss of $4 million and $1 million in profit.
What is the Target Price for BuzzFeed Stock?
The single analyst covering BZFD stock has a “strong buy” rating and expects it to touch $6 in the next 12 months, indicating an upside potential of over 100%.
However, BuzzFeed is not a profitable company and is struggling with falling sales, making it a high-risk investment right now.
On the date of publication, Aditya Raghunath did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
