AcuityAds has triple-digit upside, says Paradigm Capital

Following AcuityAds’ (AcuityAds Stock Quote, Chart, News: TSXV:AT) first quarter results, Paradigm Capital analyst Spencer Churchill is still a big believer in the company’s promise.

Yesterday, AcuityAds reported its Q1, 2015 results. The company lost $1.43-million on revenue of $3.04-million, a topline that was up 10% over the same period last year.

“We are delighted to have continued our revenue growth in Q1 2015, during a quarter that is typically the slowest in the advertising industry,” said CEO Tal Hayek. “Furthermore, as a result of investments made in earlier quarters, we saw our U.S. revenues grow by 54 per cent and our SaaS-based self-service revenues improve by 157 per cent year over year.

Churchill says AcuityAds has fast established itself as the dominant player in the Canadian programmatic real-time bidding online advertising market and has big upside despite the quarter-by-quarter ups and downs that might hinder a company of its size.

“We are encouraged by continued strong growth in self-service and U.S. revenue, while margins were solid and opex has started to come down,” said the analyst. “The offset was a decline in total revenue growth to ~10% y/y from ~50% in Q3–Q4/14. However, we note that there remains some lumpiness in the business and the growth experienced in H2/14 came after 14% y/y revenue growth reported for Q2/14 (which was similar during the last financing). Hence, we do not believe one quarter makes a trend and remain confident that revenue growth should accelerate through 2015.”

In a research update to clients today, Churchill maintained his “Buy” rating and one year target of $1.80 on AcuityAds, implying a return of 150% at the time of publication.