Following the company’s second quarter results, Haywood Capital Markets analyst Daniel Rosenberg has maintained his bullish stance on AcuityAds Holdings (AcuityAds Holdings Stock Quote, Chart, News TSX:AT).
On Wednesday, AcuityAds reported its Q2, 2019 results. The company lost $3.46-million on revenue of $25.8-million, a topline that was up 116 per cent over the $12.0-million the company posted in the same period last year.
Management said highlights of the quarter included Self-Serve revenue rising by 94 per cent to $7.1-million, Adjusted EBITDA rising to $1.1-million, and a cash position that stood at $5.2-million.
“We are extremely pleased with our financial results for the quarter and are excited for what we expect to be a very strong second half of the year,” CEO Tal Hayek said. “I am also proud to announce that the company has achieved a major milestone of surpassing $100-million in revenue on a trailing 12-month basis. I believe that achieving this milestone places AcuityAds in a very select and elite group of Canadian software companies. Furthermore, as we have now achieved this scale, management is turning significant attention to improving profitability as well continued growth going forward. The investments we continue to make in our technology and new product innovation are realizing significant returns for the company and our customers. As previously reported, the newest version of our AI technology continues to achieve better results, resulting in higher margins as it is released into a greater number of our overall client campaigns. In addition, we are very excited with the new offerings that our Product Innovation Team has in the works that we believe will significantly enhance Acuity’s market position in the growing digital advertising industry.”
Rosenberg notes that these results were well ahead of consensus estimates and was supported by strong organic growth and by the acquisition of Magnetic Media. He expects this momentum will continue into the third quarter as the company made several large contract announcements since the end of the quarter.
“Acuity reported strong Q2CY19 results that were ahead of estimates driven by growth across all markets and rollouts of large contracts announced earlier in the year,” the analyst writes. “Shares have seen pressure in a cautious market, which we view as an opportunity for investors to gain an attractive entry point given Acuity’s string of strong quarterly beats and continued momentum into the back half of the year. We adjusted our forecast and believe the strong rebound in Acuity’s business has yet to be credited in the market.”
In a research update to clients today, Rosenberg maintained his “Buy” rating and one-yeartarget price of $3.40, implying a return of 164 per cent at the time of publication.
Rosenberg thinks AT will post Adjusted EBITDA of $9.5-million on revenue of $112.2-million in fiscal 2019. He expects those numbers will improve to EBITDA of $14.7-million on a topline of $128.9-million the following year.
“Acuity is undervalued,” the analyst adds. “Acuity is trading at 0.7x EV/Rev and 1.6x EV/EBITDA of our CY20 estimates, lower than the peer group average of 3.3x EV/Rev and 19.7x EV/EBITDA multiple of CY20. Our peer group includes U.S. Ad-tech companies and Canadian software companies.”
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