AcuityAds gets price target raise at Haywood

A stronger than expected quarter has Haywood analyst Pardeep Sangha raising his price target on AcuityAds (AcuityAds Stock Quote, Chart, News: TSXV:AT).

Yesterday, AcuityAds reported its Q3, 2016 results. The company lost $479,172 on revenue of $8.87-million, a topline that was up 62 per cent over the $5.47-million the company posted in the same period a year prior.

“I am pleased to report that Acuity delivered another strong quarter, as evidenced by our 62-per-cent revenue growth and improving adjusted EBITDA [earnings before interest, taxes, depreciation and amortization]. Our adjusted EBITDA for the trailing 12-month period was $935,000,” said CEO Tal Hayek. “Contributing to our strong performance were our U.S. and self-serve segments as well as our recent acquisition of 140 Proof Inc., which we closed on Sept. 1, 2016. The amazing team at 140 Proof Inc. delivered $1.6-million of revenue in the month of September.”

Sangha notes that Acuity’s third quarter beat both his and consensus estimates on both the top and bottom line. He says that with a successful tuck-in acquisition already complete, the company is now on the hunt for more acquisitions. Overall, the analyst says that when compared to its peers, Acuity looks cheap.

“We believe Acuity is undervalued, currently trading at 1.2x EV/Revenue of our CY17 estimates, which is lower than the average of its US Ad Tech peer group and Canadian Software and Services peer group which trades at 2.3x EV/Revenue based on consensus CY17 estimates,” says the analyst. “We arrive at our target price by applying a 1.8x multiple to our FY17 revenue estimate, or 1.6x multiple to our FY18 estimate.”

In a research update to clients today, Sangha maintained his “Buy” rating, but raised his one-year target price on the stock from $3.00 to $3.50 implying a return of 73.3 per cent at the time of publication.

Sangha believes AcuityAds will post Adjusted EBITDA of $1.6-million on revenue of $33.6-million in fiscal 2016. He expects these numbers will improve to EBITDA of $2.8-million on a topline of $50.9-million the following year.