Over the past six months, Ibotta’s shares (currently trading at $27.13) have posted a disappointing 16.7% loss, well below the S&P 500’s 9.7% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Ibotta, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Ibotta Not Exciting?
Even with the cheaper entry price, we don't have much confidence in Ibotta. Here are two reasons we avoid IBTA and a stock we'd rather own.
1. Fewer Distribution Channels Limit its Ceiling
With $367.6 million in revenue over the past 12 months, Ibotta is a small player in the business services space, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and numerous distribution channels.
2. Revenue Projections Show Stormy Skies Ahead
Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Ibotta’s revenue to drop by 10.1%, a decrease from This projection doesn't excite us and implies its products and services will face some demand challenges.
Final Judgment
Ibotta isn’t a terrible business, but it doesn’t pass our bar. After the recent drawdown, the stock trades at 7× forward EV-to-EBITDA (or $27.13 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
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