As the artificial intelligence (AI) craze continues to capture global attention, interest in AI-related stocks has surged. One emerging player in this space is Kaltura (KLTR), a cloud-based video technology company offering a variety of video solutions for businesses, educational institutions, and media organizations. The company has begun integrating AI into its products and services to meet the growing demand for video content in today’s digital-first environment. Kaltura’s stock rose by 20.8% last year, outperforming the broader market. With its fourth-quarter earnings set to be announced on Feb. 20, let’s explore whether this stock is worth considering before the results are released.

About Kaltura Stock

Valued at $336.8 million, Kaltura equips organizations with tools for video communication, training, and collaboration. It also provides video platforms for schools and universities to support online learning, virtual classrooms, and student engagement. Additionally, Kaltura helps media companies and telecom providers manage, monetize, and distribute video content effectively while offering a variety of tools and APIs for developers. Its diversified software-as-a-service (SaaS) business model ensures recurring revenue streams.

In the third quarter, Kaltura reported total revenue of $44.3 million, reflecting a modest 2% year-over-year increase. Notably, about 95% of the company’s Q3 revenue came from recurring SaaS contracts, offering financial stability and predictable income through subscription revenue. However, despite steady revenue, Kaltura has faced challenges in achieving profitability. The company posted a net loss of $0.02 per share under generally accepted accounting principles (GAAP), primarily driven by substantial investments in AI product development and sales growth initiatives.

Kaltura ended the quarter with $77.6 million in cash, equivalents, and marketable securities, providing ample resources to support operations and invest in growth initiatives. In December, the company introduced Work Genie, an AI-powered agent designed to deliver “hyper-personalized, immersive digital experiences for enterprise customers and employees.” Kaltura continues to innovate with offerings like virtual event platforms, advanced video analytics, and integrations with other enterprise software, which will help expand its addressable market and attract new customers.

However, ongoing losses raise concerns about its path to profitability. The company must carefully balance growth investments with cost control to achieve sustained profitability. For the fourth quarter, management anticipates subscription revenue growth of 2% to 4%, with adjusted EBITDA expected to range from $500,000 to $1.5 million, compared to $800,000 in the same quarter last year. Total revenue is projected to either decrease by 1% or grow by 1% year-over-year, relative to $44.5 million in Q4 2023.

For the full year, Kaltura expects revenue growth of 1% to 2%, aligning with analyst estimates. Analysts forecast Q4 revenue of $44.36 million and a GAAP net loss of $0.05 per share. For the full year, analysts predict a loss of $0.22 per share, potentially narrowing to $0.19 per share by 2025.

Is Kaltura Stock a Buy on Wall Street?

Overall, Wall Street rates Kaltura stock as a “Hold,” likely due to its lack of profitability. Among the four analysts covering the stock, one gives it a “Strong Buy,” another rates it a “Moderate Buy,” one recommends a “Hold,” and one assigns a “Strong Sell.” The stock’s average target price of $2.50 implies upside potential of 11.1% from current levels. Notably, Needham analyst Ryan Koontz has set a high target price of $3, indicating potential upside of 33.3% over the next 12 months.

The Bottom Line

Kaltura is undoubtedly a dynamic player in the video technology industry, offering innovative and customizable AI-driven solutions to a diverse customer base. Its growing prospects make it appealing to those optimistic about the future of video technology. However, as a penny stock, it comes with a high level of risk, requiring investors to have a strong risk tolerance. Given its small size and unprofitable status, the risks associated with Kaltura may outweigh its potential rewards. I believe investors might find more promising opportunities in other AI-focused companies with a stronger track record or greater stability.