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Should you buy Vimeo at 90% off?

February 20, 2025

Is Vimeo a buy at 90% off?

We don't think so. Even at 90% from its peak valuation in May 2021, Vimeo, Inc. (NASDAQ: VMEO) appears to be overvalued. Vimeo's market capitalization stands at $1.12 billion, with a P/E ratio of about 28. In our view, it is hard to justify a valuation for Vimeo above $500M. The company operates in a very crowded segment with very aggressive competitors. 

Vimeo continues to innovate by leveraging AI to enhance its video creation and management tools, aiming to provide seamless and efficient solutions for its diverse user base. 

As of February 20, 2025, Vimeo enjoys a market capitalization of approximately $1.12 billion. Vimeo's market capitalization reached its peak shortly after becoming an independent public company in 2021. Vimeo was spun off from IAC and began trading on the Nasdaq under the ticker symbol VMEO on May 25, 2021. On July 7, 2021, Vimeo's stock achieved its all-time high closing price of $51.67 for a peak market capitalization of around $8.24 billion. Since that peak, Vimeo's market valuation has experienced a significant and seemingly continuous decline, reflecting both challenging market dynamics and company-specific factors.

Vimeo operates within the video hosting and video sharing industry. That is a very crowded field and Vimeo is slowly but surely getting crushed. Back in 2021, investors hoped that the New York City based company would develop a competitive moat in the industry. It didn't. Vimeo provides a platform for individuals and businesses to upload, share, and stream videos. So those everyone else and their mother by now. In segments like that, winners take it all and everyone else is left behind in the dust. In Vimeo's defense, unlike user-generated content platforms like YouTube or TikTok, Vimeo focuses on high-definition videos and offers a suite of professional video editing tools tailored for businesses. 

Vimeo was founded in November 2004 by Zach Klein and Jake Lodwick as a side project of CollegeHumor to share humorous videos among friends. The name "Vimeo" is a play on the words "video" and "me," and is also an anagram of "movie." In August 2006, IAC (InterActiveCorp) acquired Vimeo, and in May 2021, Vimeo was spun off as an independent public company, trading on the Nasdaq under the ticker symbol VMEO. 

As stated above, Vimeo differentiates itself by focusing on high-definition video delivery and providing a suite of tools for video creation, editing, and broadcasting, catering primarily to professionals and businesses. Its business model operates on a software-as-a-service (SaaS) basis, generating revenue through subscription plans for content creators and enterprises. 

In recent years, Vimeo has expanded its offerings through strategic acquisitions, including the purchase of Livestream in 2017 to enhance its live video capabilities, and Magisto in 2019, an AI-based video creation platform. Under the leadership of CEO Anjali Sud, Vimeo shifted its focus from being a consumer-oriented platform to a Software-as-a-Service (SaaS) model, providing video tools for businesses and professionals. This strategic pivot led to substantial growth, with the company reporting $89.4 million in revenue for the first quarter of 2021, a 57% increase compared to the same period in the previous year. Notably, Vimeo achieved a net profit of $3.3 million in that quarter, a significant turnaround from the $20.3 million net loss reported in Q1 2020. As of 2023, Vimeo reported having 300 million users, with approximately 1.6 million subscribers to its services. In October 2024, Vimeo appointed Charlie Ungashick as Chief Marketing Officer to strengthen its position as a reliable platform for professional and corporate video hosting. 

Vimeo continues to innovate by leveraging AI to enhance its video creation and management tools, aiming to provide seamless and efficient solutions for its diverse user base. Nonetheless, Vimeo faces competition from several platforms in the video hosting and sharing sector. Notable competitors include:

  • YouTube: The largest video-sharing platform globally, offering a vast array of user-generated content and monetization options for creators.

  • TikTok: TikTok is a video hosting and sharing social media app that allows users to create and share short videos. The company's algorithm create unparalleled user engagement. 

  • Wistia: Specializes in video hosting for businesses, providing marketing tools and analytics to help companies engage with their audience.

  • Brightcove: Offers cloud-based solutions for video hosting and publishing, catering primarily to media companies and enterprises.

These platforms, among others including Meta's Instagram and Reels, compete with Vimeo by offering video sharing features. It seems impossible for Vimeo to catch up to giants like YouTube, TikTok, or  Meta. At the same time, Vimeo's valuation seems excessive and unwarranted in light of the comparable offerings of smaller competitors like Wistia and Brightcove. 

Like Vimeo, Wistia specializes in video hosting for businesses, providing marketing tools, advanced analytics, and customizable branding options to enhance audience engagement. Target audience is businesses and marketing teams focusing on lead generation, customer engagement, and brand building. As a privately held company, specific market capitalization and stock performance data are not publicly available, but valuation should be less than Vimeo's.

Brightcove Inc. (BCOV) offers cloud-based solutions for video hosting and publishing, primarily serving media companies and enterprises with a focus on monetization and live streaming capabilities. It's targe market is large enterprises, media companies, and organizations requiring robust video distribution and monetization solutions. Trading at $4.45 per share, with a slight increase of 0.45% from the previous close. The company's market capitalization is approximately $0.32 billion.

Comparative Insights:

  • Features: While all three platforms offer video hosting services, Wistia emphasizes marketing integrations and analytics, making it ideal for businesses aiming to leverage video for lead generation and customer engagement. Brightcove provides advanced monetization options and live streaming capabilities, catering to large-scale media operations. Vimeo offers a balanced approach, serving both creative professionals and businesses with its versatile toolset.
  • Ease: User reviews suggest that Vimeo and Wistia excel in user-friendly interfaces, with Wistia scoring higher in ease of use, particularly for marketing teams. Brightcove, while feature-rich, may present a steeper learning curve for new users.
  • Customization: Wistia offers extensive branding customization options, allowing businesses to align video content closely with their brand identity. Vimeo also provides customization features but is often favored for its community and creative focus. Brightcove offers customization suited for large enterprises but may require more technical expertise to implement.
  • Analytics: Wistia stands out with its comprehensive analytics and marketing tools, enabling detailed insights into viewer behavior and seamless integration with marketing automation platforms. Vimeo offers analytics suitable for creators and small businesses, while Brightcove provides analytics tailored to large-scale content distribution and monetization efforts.

In summary, the choice between Vimeo, Wistia, and Brightcove depends largely on the specific needs and scale of the user. Wistia is well-suited for businesses seeking robust marketing tools and customization. Brightcove caters to large enterprises requiring advanced monetization and live streaming. Vimeo offers a versatile platform for both individual creators and businesses focusing on high-quality video content. 

As of February 20, 2025, Vimeo experienced a significant decline of about 19% in its stock price, closing at $5.51 per share. This huge one-day drop followed the company's fourth-quarter 2024 earnings report, which revealed earnings per share of $0.01, missing analyst expectations of $0.03. Vimeo reported revenue $103.16 million surpassing forecasts of $100.59 million. However, the year-over-year revenue decreased by approximately 2%, and earnings per share saw an 80% decline compared to the same quarter last year. Investors reacted negatively to the earnings miss and the company's guidance, leading to the substantial stock price decrease. 

We may be wrong, but in our view, even at 90% from its peak valuation in May 2021, Vimeo is significantly overpriced for what it offers investors. We don't see too much growth potential for the company and therefore no justification for a P/E ratio of 28 (similar to Meta's). We recommend avoiding Vimeo, thinking that the company will continue losing value and "melting" away, slowly but surely, in the overheated video sharing and hosting market. We are not shorting Vimeo at the moment. We will keep an eye on it. Maybe we see some value and can buy it when it gets to $3 per share. Even at that price it may be risky, as Vimeo gives us the impression of being a candidate for becoming a penny stock at 99% off its peak valuation within a couple of years. 

We'll see. The future has not been created yet. We may wrong about Vimeo and its business prospects. Maybe the company is solid and can find a way of turning market expectations around and adding value to their current and future shareholders. We wish them the best.

Now you know it. 

www.creatix.one

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