AcuityAds gets new $1.75 target at Haywood

Following the company’s second quarter results, Haywood analyst Pardeep Sangha has raised his price target on AcuityAds (TSXV:AT).

On Tuesday, AcuityAds reported its Q2, 2018 results. The company lost $2.24-million on revenue of $11.96-million, a topline that was down 31 per cent over the same period last year.

“We are very pleased with our second quarter results as we exceeded our expectations and the guidance that we provided earlier this year in terms of both revenue and EBITDA,” CEO Tal Hayek said. “We grew our gross revenue by 50% and net revenue by 55%, saw an increase in Self-Serve revenue of 42%, and improved our Adjusted EBITDA by $2.4 million, all compared sequentially to the previous quarter. Furthermore, with the launch of our next-generation AI programmatic marketing platform, our gross margins continue to be positively impacted. We continue to focus on increasing our revenues through our realigned US sales team, the addition of ADman Media and our commitment to technology enhancements. Going forward, we continue to focus on increasing our revenue while further improving our operational efficiency to enhance margins and overall profitability.”

Sangha says this quarter is a signal that AT is getting back on track. The analyst today maintained his “Buy” rating but raised his one-year price target. In a research update to clients he explained why.

“We increased our target price from $1.50 to $1.75 due to the strong quarterly results and expectations for higher future valuation multiples as the Company continues to show growth and improving profitability,” he said. “We believe Acuity is back on track as we are expecting the rebound in sales to continue in Q3CY18.”

Sangha thinks AcuityAds will generate EBITDA of $2.0-million on revenue of $52.6-million in fiscal 2018. He expects those numbers will improve to EBITDA of $8.7-million on a topline of $68.0-million the following year.

“We believe Acuity is undervalued,” Sangha concludes. “Acuity is currently trading at 1.1x EV/Revenue of our CY18 estimates, which is lower than its peer group average trading at 4.3x EV/Revenue of consensus CY18 estimates. Our target price represents 1.4x EV/Revenue multiple and 10.7x EV/EBITDA multiple of our CY19 forecast.”