Shutterstock Analyst Bumps Up Price Target By 45% As AI Gains Steam

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  • Needham analyst reiterated a Buy rating on the shares of Shutterstock Inc SSTK and raised the price target from $62 to $90.
  • In Q4, Enterprise grew 30% Y/Y on a constant currency basis, putting an exclamation mark on the acceleration from -2% contraction in '20, to +10% constant currency growth in '21 to +20% in '22, noted the analyst.
  • Growth is being driven by multi-asset subscriptions, multiple Computer Vision deals (generative AI), strong momentum in studios/editorial and benefits from M&A.
  • Despite these growth tailwinds, the analyst forecasts Enterprise growth to decelerate in '23E to high single digits on a constant currency basis.
  • The most important thing the analyst learned is that Computer Vision training deals do have a recurring aspect to the revenue. This has given analyst confidence in SSTK's ability to benefit from the seemingly mega-trend of generative AI over multiple years. 
  • Following up on the announced partnership with OpenAI and LG last quarter, SSTK has struck a Computer Vision deal with Meta Platforms, Inc. META to train their generative AI model and enhance their ML capabilities.
  • Computer Vision deals positively impacted Q4 and are a source of the Enterprise acceleration in the quarter, added the analyst.
  • One of only a few leading players in the $6 billion stock content industry, the analyst believes spending on digital advertising will continue rising as the world shifts online. 
  • The analyst foresees benefits for the entire industry from the growth of E-commerce and a reallocation by brick & mortar companies of spending associated with physical retailing to digital advertising. 
  • Price Action: SSTK shares are trading higher by 3.61% at $78.31 on the last check Friday.
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