A fresh downgrade raises new questions—but is SEMrush’s post-earnings decline overdone, or just beginning?

SEMrush Holdings (SEMR) is a global SaaS provider specializing in online visibility management, digital marketing analytics, and search engine optimization tools for businesses of all sizes. Its platform is widely used by marketers and enterprises seeking actionable insights into SEO, paid search, content marketing, and social media. With digital marketing spend continuing to grow, SEMrush has ridden a wave of industry momentum, but today’s analyst action may signal a shift in sentiment.

Morgan Stanley, one of Wall Street’s most influential research houses, has downgraded SEMrush from “Overweight” to “Equal Weight” and set a new price target of $9 per share. This move comes on the heels of mixed Q2 results for SEMrush: while the company posted robust 20% revenue growth, earnings missed consensus estimates and the stock has recently plumbed its 52-week lows. For investors, this downgrade is a critical moment to reassess the risk/reward profile of SEMrush in the context of both its long-term business model and near-term market dynamics. Analyst rating changes—especially from a heavyweight firm—can accelerate momentum shifts and impact institutional flows.

Key Takeaways

• Morgan Stanley downgrade brings a new $9 target, representing a potential upside of nearly 22% from the current price of $7.35.

• SEMrush’s stock price is trading near its lowest levels of the past year, with an RSI of 36 signaling possible oversold conditions.

• Recent Q2 earnings highlighted 20% revenue growth but missed EPS estimates, prompting a mixed reaction from the market and analysts.

• Morgan Stanley’s downgrade, given its influence and sector expertise, adds significant weight to short-term caution—even as the price target remains above current levels.

• News flow is dominated by earnings discussions and the company’s continued expansion, but questions remain about margin leverage.

Morgan Stanley’s Downgrade: A Signal of Caution Despite Upside

Morgan Stanley is among the most widely followed and respected names in equity research, with deep coverage and strong sector expertise in internet and SaaS. The shift from “Overweight” to “Equal Weight” signals a move to the sidelines: Morgan Stanley sees SEMrush as fairly valued relative to its risk profile, even if the $9 target price implies meaningful upside from today’s levels. In the context of a market where digital advertising budgets remain under scrutiny and profitless growth is out of favor, such a downgrade can signal a broader sector rotation or a pause in aggressive institutional buying.

Morgan Stanley’s coverage in marketing technology and SaaS lends particular weight to this call; their caution often prompts other institutions to re-evaluate positions. Notably, the new target price is still materially above the current market price—suggesting the firm does not foresee a collapse, but does see limited catalysts for outperformance in the near term.

How the Downgrade Aligns with SEMrush’s Trajectory

Morgan Stanley’s downgrade comes after a period of declining stock price and mixed quarterly performance. Given the firm’s strong track record in identifying inflections in growth SaaS, today’s action should not be taken lightly by investors.

“Morgan Stanley’s sector expertise means this downgrade will be closely watched by institutional allocators. Their caution is amplified by SEMrush’s recent earnings miss and technical weakness.” Deepstreet

SEMrush’s Financials: Solid Growth, But Margin Questions Persist

SEMrush’s Q2 2025 results, released just days ago, painted a nuanced picture. The company reported:

• 20% year-over-year revenue growth, a strong metric in the current SaaS environment where many peers have seen deceleration.

• EPS of $0.05, missing consensus estimates of $0.08, and representing a small decline from $0.06 in the prior year’s quarter.

While top-line momentum remains robust, the shortfall on the bottom line has raised questions about operational leverage and cost discipline. This is especially relevant as the market shifts focus from pure growth to profitable growth. The company’s robust platform adoption and retention rates remain positive, but investors are increasingly scrutinizing the path to higher margins.

Recent Earnings: Investor Reactions

Recent coverage from Zacks and The Motley Fool underscores the market’s mixed reaction:

• “SEMrush Holdings, Inc. (SEMR) came out with quarterly earnings of $0.05 per share, missing the Zacks Consensus Estimate of $0.08 per share. This compares to earnings of $0.06 per share a year ago.” (Zacks)

• “Semrush Q2 Revenue Rises 20%.” (The Motley Fool)

In short, while the company continues to grow its top-line at an impressive clip, margin expansion remains elusive—something that likely factored into Morgan Stanley’s downgrade.

Stock Performance: Oversold, or a Value Trap?

Over the last year, SEMrush shares have experienced a significant drawdown. The stock is currently trading at $7.35, just above its 52-week low of $7.05, and well below its high of $18.74. Technical indicators reinforce near-term bearish momentum:

• RSI at 36 suggests the stock is approaching oversold territory.

• 20-day EMA and SMA both hovering above current price (EMA_20: $8.89; SMA_20: $9.01), indicating a downtrend.

• Bollinger Bands: Lower band at $7.54 and upper at $10.48, with shares hugging the lower band.

Volume has also declined, with the lowest daily volume of the year occurring just yesterday. This combination of technical weakness and waning interest suggests that, despite potential upside to the new price target, buyers remain cautious until there is more clarity on earnings and margin trajectory.

Is the Downside Priced In?

Given that Morgan Stanley’s price target of $9 is nearly 22% above the current market price, there is a technical argument to be made for a relief rally—especially if oversold conditions attract bargain hunters. However, the downgrade itself may limit near-term enthusiasm from institutional buyers, creating a tug-of-war between value and caution.

Recent News: Earnings Overshadow Progress

The last 30 days have been dominated by earnings coverage:

• Q2 earnings call transcript (Seeking Alpha)

• Q2 revenue growth headlines (The Motley Fool)

• Earnings miss analysis (Zacks)

No major corporate actions or product launches have been announced, leaving the market’s focus squarely on the financials. The lack of positive catalysts has likely contributed to the recent price weakness.

Analyst Confidence: Weighty Call from a Market Leader

Morgan Stanley’s downgrade is not a knee-jerk reaction. The firm’s analyst team has deep expertise in SaaS and digital marketing, and their calls often move the market—especially in less widely held names like SEMrush. This downgrade, coming after a period of underperformance and a mixed earnings report, carries significant weight for both institutional and retail investors. In the short term, it is likely to reinforce existing caution and could prompt further de-risking by fund managers.

“Morgan Stanley’s downgrade reflects both near-term caution and a recognition that SEMrush’s growth story is intact, but margin improvement is critical for the next leg up.” Deepstreet

What Investors Should Watch

• Margin Expansion: Will SEMrush demonstrate improved cost control and operating leverage in coming quarters?

• Institutional Flows: Does the stock attract value buyers on technical oversold signals, or do institutional sellers dominate following the downgrade?

• Sector Trends: With digital advertising budgets volatile, any signs of stabilization or growth may provide a tailwind.

• Catalysts: Investors should monitor for new product launches, partnerships, or guidance updates that could shift sentiment.

Conclusion: A Moment of Maximum Caution—and Opportunity?

SEMrush remains a fast-growing SaaS company with a leading position in digital marketing analytics, but recent results and Morgan Stanley’s influential downgrade have cast a shadow over the near-term outlook. With the stock trading near 52-week lows, technical indicators suggest oversold conditions—and the $9 price target leaves room for a rebound. Yet, the weight of Morgan Stanley’s call cannot be ignored: unless SEMrush demonstrates margin improvement, the risk/reward skews defensive.

For investors, this is a textbook case where patience and discipline are required. Keep a close eye on forward guidance, margin trends, and sector-wide signals. The next few quarters will be decisive for SEMrush’s narrative—and for those seeking asymmetric returns in the SaaS space.