What Happened:

Shares of digital media measurement and analytics provider DoubleVerify (NYSE:DV) fell 21.8% in the pre-market session after 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.

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What is the market telling us:

DoubleVerify's shares are quite volatile and over the last year have had 10 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 7 months ago, when the stock dropped 9.2% on the news that the company reported second-quarter revenue that narrowly beat analysts' estimates and roughly came in the middle of the company's previous guidance range. It is usually a negative for a fast-growing and high-valuation company not to beat. To add salt to the wound, next quarter's revenue guidance came in slightly below analysts' expectations, and the full-year revenue guidance also slightly missed Wall Street's expectations. Also, the company announced an agreement to acquire Scibids, a global leader in AI-powered digital campaign optimization, in a cash and stock transaction valued at $125 million. While some may cheer the seemingly on-trend acquisition, the news of the deal was overshadowed by a weak quarter featuring disappointing guidance.

DoubleVerify is down 9.9% since the beginning of the year, and at $32.52 per share it is trading 23.5% 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 $903.19.

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