Blowout preliminary fourth quarter results are a sign that there is still upside left in AcuityAds (TSXV:AT), says Echelon Wealth Parters analyst Rob Goff.
On January 17, AcuityAds reported prelimary Q4 results that said the company expects to report EBITDA of approximately $2.0-million on revenue of approximately $18.0-million. The number were far above the street consenus and last year’s fourth quarter results.
“Based on these preliminary results, Q4 is expected to be an exceptionally strong quarter for the company,” said CEO Tal Hayek. “Our strong revenue and EBITDA growth, along with our recent $4.6-million bought-deal financing, should position the company well to capitalize on the tremendous opportunities that lie ahead of us.”
Goff thinks this upside surprise is not just a one-off.
“We feel confident that the revenue momentum reported with the preliminary Q416 results was sufficient to warrant a positive revaluation given the prospects of positive forecast revisions and the Company’s enhanced ability to complete accretive acquisitions building on the success of 140 Proof,” he says. “We believe our revenues leave upside while our EBITDA (modestly below some) allows for further expansion-driven investments. We believe AcuityAds’ revenue momentum reflects on market and product strength but also the consideration that the Company now has a relatively full sales team with traction. The Company was previously in more of a start-up growth mode where it worked to expand sales while pruning those where initial traction had disappointed. Goff added: “We, in turn, believe the Company’s revenue momentum and newfound scale make it an increasingly attractive acquisition target.
In a research update to clients today, Goff maintained his “Speculative Buy” rating on AcuityAds, but raised his one-year price target on the stock from $3.90 to $4.40, implying a return of 14.6 per cent at the time of publication.
Goff believes AcuityAds will post EBITDA of $2.7-million on revenue of $39.1-million in fiscal 2016. He expects these numbers will improve to EBITDA of $4.4-million on a topline of $58.6-million the following year.