On the heels of its largest-ever order, Echelon Wealth Partners analyst Rob Goff remains bullish on AcuityAds (AcuityAds Stock Quote, Chart TSXV:AT).
On Tuesday, AcuityAds announced it had signed a unnamed “global financial service provider” to a $4.5-million ad campaign.
“We are thrilled to work alongside this global client to help them effectively deliver their advertising campaign to the right audience while ensuring the highest ROI possible,” said Tal Hayek, Acuity’s chief executive officer. “The majority of this contract will run through Q1 of 2019 and provides further proof of our growth momentum and industry-leading AI technology.”
Goff says AT remains cheap compared to its most immediate peer.
“We note that the shares of The Trade Desk, (TTD-Nasdaq, NR) (where estimates for 2018 revenue growth stand at 36%) are currently valued at 26.2x/20.1x EV/Revenue and 111.2x/89.1x EV/EBITDA 2017/18, relative to AT valued at 0.96x 2018 EV/Revenue. The 2018 EV/EBITDA multiple for AT at 21.5x reflects its scaling with modest 2018 EBITDA margin of just 4.2% versus The Trade Desk, where margins are forecasted at 24% in 2017 and 23% in 2018. However, AT’s 2019 EV/EBITDA at 5.6x stands out against its peers and growth prospects. While The Trade Desk’s scale, capital flexibility, and execution warrant a premium, the valuation gap warrants consideration.
The analyst says this order may signal that AcuityAds is moving upmarket, into The Trade Desk’s territory.
“When considering competition between the two companies, it should be highlighted that AcuityAds has historically targeted smaller and medium-sized enterprises against TTD’s larger-deal focus, where clients are $500K+. We believe AT could work well within TTD as a flanker brand targeted at smaller accounts. We do suspect that AT is moving up-market targeting a greater number of larger accounts as TTD is likely moving towards smaller accounts. Although from an AT perspective, it is worth noting that the Gartner Group review of the space referenced client feedback that TTD was relatively inflexible on pricing and that the technology has a bit of a learning curve for clients. Furthermore, we note that a prospective acquirer such as The Trade Desk would realize substantial technology savings considering our $6.9M forecast for AT’s 2018 R&D.”
In a research update to clients today, Goff maintained his “Speculative Buy” rating and one year price target of $3.40, implying a return of 161.5 per cent at the time of publication.
Goff thinks AT will post Adjusted EBITDA of $9.4-million on revenue of $90.4-million in fiscal 2019.
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