Veritone (NASDAQ:VERI) plunged over 20% on Wednesday as Craig-Hallum downgraded the stock to “Sell” and said that the negative organic growth combined with its continued cash burn and new high-cost debt creates an “equity impairment” situation.
The advertising agency, which also provides content licensing and media services, on Tuesday not only forecasted an annual revenue below estimates but also posted its third-quarter earnings that missed expectations.
“The revenue declines are weighing materially on the company’s profitability,” said the financial services firm that also lowered its price target on Veritone to $0.50, which implies a downside of about 7% compared to its current trading price as of 1955 GMT.
Craig-Hallum said it saw Veritone having a significant liquidity crunch with about $14M on unencumbered cash and $138M of debt as it exited the third quarter.
Commenting on Veritone’s recently inked $77.5M term loan, the analysts estimated that the company’s debt service costs would increase to over $4M per quarter starting June 2024.
“By adding debt from a lender of last resort we believe there is a realistic scenario where the equity value is not much above the debt load,” Craig-Hallum said.
Veritone has fallen 59.75% since the start of the year, and is rated “Strong Sell” by Seeking Alpha’s Quant Rating system on profitability and momentum concerns.