Benchmark Raises PT to $10 for System1, Maintains Buy Rating

Benchmark Raises PT to $10 for System1, Maintains Buy Rating

Benchmark Research has raised its price target (PT) for System1 Inc (SST) to $10, while maintaining its buy rating. This move comes following the company's Q2 2025 earnings report, which revealed a better-than-expected revenue of $78.1 million, surpassing the forecast of $75.48 million [1]. Despite a 17% year-over-year (YoY) revenue decline, System1's stock surged 12.4% post-earnings, closing at $5.89 [1].

The positive market reaction reflects confidence in System1's strategic initiatives and operational improvements. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value model, though investors should note the stock's high volatility with a beta of 1.38 [1]. Key takeaways from System1's Q2 performance include a notable revenue beat, a 34% YoY growth in product segment revenue, and operational efficiency efforts expected to reduce operating expenses by 5% in H2 2025 [1].

System1's financial highlights for Q2 2025 include:
- Revenue: $78.1 million, a 17% decrease YoY
- Adjusted EBITDA: $11.7 million, an 18% increase YoY
- Adjusted Gross Profit: $41 million, a 6% increase YoY
- Cash position: Ended the quarter with $63.6 million in unrestricted cash
- Current ratio: 1.27
- Debt-to-equity ratio: 4.02
- Market capitalization: $55.3 million [1]

The company launched new products, including Vanish Private AI and 1.org, and saw increased user engagement across key platforms like Coupon Follow and Startpage. The CEO, Michael Blend, highlighted the strength of the product segment, stating, "Our product segment is growing, high margin, and generates a lot of cash" [1]. The CFO, Tridavesh Gadabi, expressed confidence in the company’s resilience, noting, "We are confident in the fundamental resilience of our business" [1].

However, System1 faces continued volatility in the digital advertising market, a 17% YoY revenue decline, and changes in Google’s RSOC platform, which may affect marketing strategies. The lack of specific financial guidance adds uncertainty to future expectations [1].

Benchmark's PT raise to $10 reflects optimism in System1's strategic initiatives and operational improvements, despite the challenges in the digital advertising market. The company's focus on operational efficiencies and exploring potential M&A opportunities is expected to drive future growth [1].

References:
[1] https://www.investing.com/news/transcripts/earnings-call-transcript-system1-q2-2025-revenue-beats-forecasts-stock-surges-93CH-4180084