Expecting revenue and earnings beats from AcuityAds’ (AcuityAds Stock Quote, Chart TSXV:AT) fourth quarter, analyst Pardeep S. Sangha of Haywood Securities has upped his target price for the stock, saying the company is back on track after a period of disappointments.
On Wednesday, AcuityAds released preliminary fourth quarter 2018 results, which featured revenue of $32.5 million, a 115-per-cent year-over-year rise, and Adjusted EBITDA of approximately $3.3 million, a 403-per-cent increase over last year’s $0.7 million.
“We are incredibly pleased with our results in Q4 and our overall performance in 2018. We achieved significant revenue growth and meaningful positive Adjusted EBITDA, which is further proof of the success of our industry-leading technology, continued investments in our team and the strategic acquisitions completed throughout the year,” said CEO Tal Hayek, in a press release. “In addition, Q1, which is seasonally the slowest quarter of the year, is starting off with strong year-over-year growth and positive momentum.”
Sangha says the Q4 revenue would soundly beat both his estimate of $24.1 million and the consensus $25.0 million while the $3.3 million in earnings would beat his $2.6 million and the consensus $2.5 million.
“The past year has been a volatile one for Acuity, as the Company dealt with the removal of several bad partners from its platform and the loss of a major customer on the 140Proof platform, leading to a significant decline in the Company’s share price. We believe markets have not yet fully realized the recovery in the Company’s business,” says Sangha in an update to clients on Wednesday.
“We recommend investors accumulate Acuity shares as the Company is back on track with improving profitability,” he says. “The current share price offers a compelling entry point for investors given the Company has put the bad partners behind it, shored up its balance sheet and is accelerating growth both organically and through acquisitions.”
Sangha is now forecasting 35 per cent revenue growth over 2019 and 15 per cent over 2020. His new estimates for 2019 are $94.2 million in revenue (previously $85.2 million) and $9.4 million in Adjusted EBITDA (previously $8.5 million). His estimates for 2020 are $108.6 million in revenue (previously $100.0 million) and $13.6 million in Adjusted EBITDA (previously $12.8 million).
For upcoming catalysts, the analyst sees: (1) strong momentum in Q1 (100 per cent year-over-year growth); (2) the launch of a new platform during Q1; (3) additional acquisitions over 2019; and (4) improving profitability over 2019 (Sangha is expecting ten per cent Adjusted EBITDA margin for the year).
Sangha rates Acuity Ads a “Buy” with a new target price of $3.25 (previously $2.50), representing a projected return of 134 per cent at the time of publication.