Buy AcuityAds for a 145 per cent return, Echelon Wealth says

Rob Goff of Echelon Wealth Partners says AcuityAds Holdings’ (AcuityAds Stock Quote, Chart TSXV:AT) announcement of new client orders is more evidence that the digital advertising company is gaining revenue traction. In a client update on Wednesday, the analyst reiterated his “Speculative Buy” rating and $3.40 target price for AT, representing a projected 12-month return of 144.6 per cent at the time of publication.

On Tuesday, AcuityAds issued a release saying it had recently signed “several multi-million dollar orders” with new and existing clients, including leaders in the pharmaceutical, banking consumer products and auto retail industries.

“These new larger deal sizes are a strong validation of Acuity’s ability to deliver great ROI to our advertisers through our industry-leading AI technology and best-in-class sales team,” said Tal Hayek, CEO, in the press release. “We continue to benefit from the significant shift in advertiser’s budgets towards programmatic and digital media spend.”

Goff says that he had just adjusted his forecasts higher following Acuity’s release of its preliminary Q418 report on January 23 but he stated that those numbers may need a further upgrade once the final fourth quarter results are in.

“We retain our longstanding positive view towards AT’s programmatic platform,” says Goff. “It was this view that prompted our decision to add AT to our Top Pick portfolio as of September 2018 when the shares were at $1.13. We noted at the time that we were taking the uncharacteristic move of adding a turnaround situation into our portfolio given the expectation that revenue traction was set to take on a new trajectory.”

Goff argues that a valuation gap exists between AcuityAds and US competitor The Trade Desk and that because Acuity has historically targeted smaller and medium-sized enterprises in comparison to The Trade Desk’s larger deal focus, Acuity could work well within The Trade Desk as a flanker brand targeted at smaller accounts.

Goff is expecting AT to generate Adj. EBITDA in 2019 of $9.3 million on revenue of $90.4 million and Adj. EBITDA in 2020 of $16.4 million on a top line of $108.7 million.