In a research report to clients yesterday, Sangha initiated coverage of AcuityAds with a “Buy” rating and a one-year price target of $2.25, implying a return of 102.7 per cent at the time of publication.
Sangha says investors looking for exposure to one of the fastest growing aspects of digital media need look no further than Acuity.
“An increasing portion of advertising dollars are shifting from traditional media towards programmatic advertising, which is the automate buying and selling of advertising media through ad exchanges or marketplaces, says Sangha. “Within the Digital Ad industry programmatic will account for $21.6B in 2016 om the U.S. alone, growing more than 24% over 2015. Acuity is a rapidly growing advertising technology company that we believes is well positiedn to capitalize on the expanding programmatic advertising industry.”
Sangha notes that AcuityAds has just turned the corner and become positive on an Adjusted EBITDA basis. He expects the company will grow its EBITDA from $0.5-million in fiscal 2016 to $2.1-million in fiscal 2017. On the revenue side, the analyst expects Acuity’s topline will grow 42 per cent in 2016 to $29.4-million, and another 37 per cent the following year to $40.4-million.
Sangha says there are risks to AcuityAds business, namely a highly competitive and nascent space that is moving quickly, and the fact that these are still early days for the company’s self-serve product. But he thinks these risks must be weighed against the upside of a potential takeout or M&A on the company’s behalf and the already proven rapid growth of said self-serve business segment.
At press time, shares of AcuityAds were up 6.1 per cent to $1.22.