Paradigm Capital analyst Kevin Krishnaratne is taking a wait-and-see approach to AcuityAds (TSXV:AT).
On Tuesday, AcuityAds reported its Q3, 207 results. The company lost $1.6-million on revenue of $14.5-million, a topline that was up 64 per cent over the same period last year.
“Acuity delivered another strong quarter as demonstrated by our 64-per-cent revenue growth,” said CEO Tal Hayek. “As highlighted by our recent win announcements, we have begun seeing meaningful traction from our 140 Proof and Visible Measures acquisitions, enabling us to gain access to a much larger share of advertising spend from our clients.”
Krishnaratne says there are positive things happening at AcuityAds, but also that has become a bit more wary.
“Acuity’s Q3 results reflected in-line revenue and better Self-Service growth trends, though EBITDA missed on lighter net revenue and higher-than-expected opex,” the analyst says. “Management remains bullish on its ability to drive cross-selling opportunities across all of Acuity’s platforms, especially ahead of the busy holiday season, maintaining its outlook for the year, which calls for +50% revenue growth (including M&A). We still remain of the view that Acuity could see multiple opportunities for upside to our estimates on the back of cross-selling initiatives, M&A, and the ongoing transition of media spending toward programmatic. However, we have decided to take a more conservative valuation approach..”
In a research update to clients today, Krishnaratne maintained his “Buy” rating on AcuityAds, but lowered his one-year price target on the stock from $3.75 to $2.25, implying a return of 30.1 per cent at the time of publication.
Krishnaratne thinks AcuityAds will generate EBITDA of zero on revenue of $59.1-million in fiscal 2017. He expects those numbers will improve to EBITDA of $4.1-million on a topline of $70.6-million the following year.