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Beacon Securities raises its target on Sabio

Better than expected third quarter results have Beacon Securities analyst Gabriel Leung raising the roof over Sabio Holdings (Sabio Holdings Stock Quote, Charts, News, Analysts, Financials TSXV:SBIO). In a Tuesday report to clients, Leung spoke of Sabio’s faster-than-industry growth in the ad tech space and reiterated a “Buy” rating on the stock while increasing his target price from C$3.00 to C$3.25 per share. 

Los Angeles-based Sabio, an advertising tech software and services company, reported its third quarter 2022 numbers on Tuesday, showing a 75 per cent year-over-year revenue increase to $11.9 million and a 78 per cent lift in adjusted EBITDA to $1.2 million. (All figures in US dollars except where noted otherwise.)

The company said the higher revenue was primarily organic, while gross margin also increased from 60.8 per cent a year ago to 61.4 per cent for the Q3 2022. Sabio said it finished the quarter with a record $3.6 million in cash compared to $0.5 million a year prior, giving it enough cash to meet its current growth objectives, according to management.

“Underpinned by our strength in CTV and OTT streaming, which has now become Sabio’s dominant sales category, we expect strong revenue growth in the fourth quarter on both a sequential and year-over-year basis and to end 2022 with positive Adjusted EBITDA1 for the fiscal year,” said Sabio CFO Sajid Premji in a press release.

“Moreover, we continue to be well capitalized, having ended the quarter with its highest cash balance in the Company’s history, while still having over US$3 million of untapped credit available on our line of credit with Avidbank,” Premji said.

Below, Cantech Letter’s interview with Sabio CEO Aziz Rahim

Leung said Sabio’s top and bottom results were beats of his estimates, with the $11.9 million in revenue coming in ahead of his forecast at $8.5 million and EBITDA at $1.2 million also better than Leung’s call at $539,000.

Leung said Sabio performed well despite a volatile macro environment and he singled out Sabio’s CTV platform as a difference-maker, one which has helped Sabio win new Fortune 100 companies and deepen its relationship with existing clients.

“[W]e believe our growth thesis on Sabio remains intact with the company continuing to aggressively grow its customer base and contributions from existing customers,” Leung wrote. “At its current valuation of 1.5x EV/net sales versus the [peer] group at 4.3x, we continue to view the stock as a compelling investment opportunity, particularly given its superior growth rates.”

At press time, Leung’s new C$3.25 target represented a projected one-year return of 282 per cent.

Disclosure: Sabio Holdings is an annual sponsor of Cantech Letter.

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About The Author /

Jayson is a writer, researcher and educator with a PhD in political philosophy from the University of Ottawa. His interests range from bioethics and innovations in the health sciences to governance, social justice and the history of ideas.
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