What Happened:

Shares of digital media measurement and analytics provider DoubleVerify (NYSE:DV) fell 40.5% in the pre-market session after the company reported first quarter earnings results. Double Verify lowered the midpoint of it's full year revenue guidance by 3.9% or $27 million, blaming large retail and CPG (consumer packaged goods) customers and their choppy spending patterns. Adjusted EBITDA guidance was also lowered. This brings up a question of customer concentration and potentially that secular volume tailwinds from social media and CTV (connected TV) are not that powerful at the moment. Overall, the results could have been better, and after competitor Integral Ad Science (NASDAQ:IAS) warned of pricing competition in the market last quarter (which DV denied seeing), this result is certainly bad for sentiment and puts into question what short to medium-term topline projections should look like. Following the results, Keybanc downgraded the stock's rating from Overweight (Buy) to Sector Weight (Hold).

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What is the market telling us:

DoubleVerify's shares are quite volatile and over the last year have had 11 moves greater than 5%. But moves this big are very rare even for DoubleVerify and that is indicating to us that this news had a significant impact on the market's perception of the business. 

The biggest move we wrote about over the last year was 2 months ago, when the stock dropped 21.8% on the news that the company reported fourth-quarter results and provided next-quarter and full-year revenue as well as adjusted EBITDA guidance, below expectations. On the other hand, revenue in the quarter beat slightly, and gross margin improved. 

During the earnings call, the CEO Mark Zagorski provided some clarity on some market concerns, adding, "We are not seeing pricing pressure, period…And when we close new deals, of which we announced some great ones, we're not closing them based on price. We closed them based on stronger technology, unique tools…" These concerns relate to competitor Integral Ad Science (NASDAQ: IAS), which also gave weak guidance when it reported earnings and spoke of pricing competition and concessions in the industry, stoking fears of price wars and a deflationary environment. The market turned much more negative on DV when the company reported, interpreting the results as a stronger indication that the industry is likely to see lower pricing power over the medium to long term and that the issues are not just confined to IAS.

DoubleVerify is down 48.7% since the beginning of the year, and at $18.51 per share it is trading 56.5% below its 52-week high of $42.50 from February 2024. Investors who bought $1,000 worth of DoubleVerify's shares at the IPO in April 2021 would now be looking at an investment worth $514.03.

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