Semrush Holdings, Inc. (SEMR): A Bull Case Theory

We came across a bullish thesis on Semrush Holdings, Inc. on P14 Capital’s Substack. In this article, we will summarize the bulls’ thesis on SEMR. Semrush Holdings, Inc.’s share was trading at $7.68 as of September 2^nd. SEMR’s trailing P/E was 138.64 according to Yahoo Finance.

Semrush (SEMR) reported mixed results in 2Q25, with the weak 3Q guide reflecting challenges expected to persist, particularly at the low end of its customer base, which includes solopreneurs and freelancers accounting for roughly 15–20% of ARR. Macro pressures and rising paid CPC costs have constrained growth and increased customer acquisition costs, prompting management to redirect resources toward higher-growth, higher-retention segments such as enterprise and AI solutions. SMBs, which represent a separate 20–25% of ARR, continue to adopt the platform steadily. SEMR’s top-line ARR reached $435.3M, up 15% Y/Y, while paying customers dipped slightly to ~116K, with modest NRR of 105%, negative FCF of $3.6M, and weak GAAP EBIT driven by elevated expenses, headcount growth, and FX headwinds.

Despite near-term headwinds, the underlying thesis remains intact. Enterprise and mid-market adoption is accelerating, with customers above $10K ARR growing 35% Y/Y and those above $50K ARR up 83% Y/Y. Enterprise NRR remains above 120%, ARPU rose 15% Y/Y to $3,756, and AI products are scaling rapidly, with enterprise+AI ARR now projected at $50M by year-end. Management has announced a $150M share repurchase, highlighting disciplined capital allocation. Looking forward, SEMR anticipates FY26–27 ARR growth of ~18% Y/Y, with margins expected to expand gradually as resources shift to enterprise+AI.

Valuation is primarily driven by top-line growth, with a base-case EV/Sales of 3.5x on FY26E sales of $525M implying a $13.69/share target (+73% in under two years). The bull case assumes 20% CAGR and 5x EV/Sales for $20.33/share, while the bear case reflects 12.1% CAGR and 2x EV/Sales for $6.94/share. Despite short-term mix pressures, SEMR’s accelerated enterprise adoption, AI tailwinds, and capital return program present a compelling upside skew for investors, with limited downside relative to the bear scenario.

Previously we covered a bullish thesis on Similarweb Ltd. (SMWB) by 1rabbitresearch in November 2024, which highlighted the company’s leadership in web analytics, valuable data assets, and accelerating revenue growth supported by digital adoption. The company’s stock price has appreciated approximately by 21% since our coverage. This is because the thesis played out with stronger demand. The thesis still stands as P14 Capital shares a similar view on SEMR but emphasizes enterprise and AI growth.

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Disclosure: None.