Why Vimeo Stock Could Jump 25% Higher

IPO stock photo | by lendingmemo_com

Vimeo Inc. (Nasdaq: VMEO) just became the 11th company to go public under Barry Diller's InterActiveCorp (IAC), and shares plummeted right out the gate from $52.08 to $44. That's in part thanks to IAC shareholders and other insiders selling, and not because Vimeo is a bad company.

The video hosting and sharing platform that's only four years into its rebrand came out of its first day as a publicly traded company with a market value of $8.4 billion, less than the $10.6 billion it anticipated. J.P. Morgan analyst Cory Carpenter's valuation had Vimeo at $9 billion, so is the stock undervalued or overvalued? Is it a buy?

The company's public listing comes on the heels of posting a 57% sales growth in Q1, when it marked adjusted operating profits at about $1.8 million, marking the third straight quarter in the green. We have reason to believe that dip is precautionary – it's not unusual for a stock to drop right after its IPO. In fact, it creates opportunity for investors.

When CEO Anjali Sud pivoted Vimeo's strategy from a viewing destination or media platform to a software-as-a-service (SaaS) company, she knew what she was doing. The 16-year-old company is four years into this strategy that targets filmmakers, professional video creators, and businesses – from small mom-and-pop businesses to large Fortune 500 companies that are jumping on board the age of video content.

Rather than competing with Netflix and the $17 billion it has to spend, Sud saw an opportunity to target the businesses that now require video content without losing its existing users.

This new strategy is what sets Vimeo apart from YouTube or Instagram, and finding that niche is what will help it sustain and grow in the future.

Here's what the tech stock is doing to separate itself from the pack, plus a Vimeo stock price prediction.

How Vimeo Pivoted Against Competitors

While YouTube attracts creators and content to its platform, it aims to keep viewers engaged with its site to spend more time on it because it makes money from advertising. That's why you get those 15-30 second commercials on monetized videos on YouTube.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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