iA Capital initiates coverage of MediaValet with a Buy rating

The stock got kicked around last year for a considerable loss, but there are better times ahead for Canadian digital asset management name MediaValet (MediaValet Stock Quote, Charts, News, Analysts, Financials TSX:MVP), according to iA Capital Markets analyst Neehal Upadhyaya, who launched coverage on Friday with a “Buy” rating and $1.50 target price. Upadhyaya said with its proven platform indicating the company’s ability to survive in a competitive market, MediaValet should do well in 2023.

Vancouver-based MediaValet is a 100 per cent cloud-based, enterprise-class digital asset management (DAM) provider that targets customers in the $50 million-plus revenue scale globally. Founded in 2010, the company has 95 employees, 465 enterprise customer deployments and 61 global data centres. 

In terms of its history, the company won a Microsoft Award for Modern Marketing Innovation in 2016 and was a finalist for Global Partner of the Year. MediaValet developed further integrations with other platforms like Slack and AutoCAD and in 2019 introduced enterprise-grade AI capabilities. Since then, the company has had an $11.5-million equity raise and a further $6.7 million of warrants in 2020 when it hit the $100 million market cap level before graduating to the TSX senior board in 2021.

For Upadhyaya, MediaValet’s partnership with Microsoft gives it a let up on other DAM providers, where MVP uses its Azure platform to build its DAM solution. Upadhyaya said it makes for a significant selling point since MVP has the only DAM solution that can open and edit Microsoft Office documents directly with its DAM.

“Azure has a vast global presence, giving the Company the greatest geographic coverage out of any of its competitors. Due to this, MVP can service companies that are multinational, something many of its peers simply cannot do,” Upadhyaya wrote.

Upadhyaya sees continued topline growth in MediaValet, quoting a G2Crowd survey that found 95 per cent of MVP’s customers achieve a return on investment within one year, while a full 98 per cent of its customers renew their subscriptions after their first year, showing “the strong value proposition the company’s solution provides its clients,” Upadhyaya said.

On the numbers, Upadhyaya thinks MVP’s revenue will go from $9 million in 2021 to $13 million in 2022 and onto $17 million in 2023, while adjusted EBITDA is projected to go from negative $8.3 million in 2021 to negative $9.6 million in 2022 and to negative $5.5 million in 2023. The analyst said it’s management’s goal to be free cash flow positive by the fourth quarter of this year. 

At press time, Upadhyaya’s $1.50 target represented a projected one-year return of 27.1 per cent. The analyst said his target is based on a 3.5x multiple of his 2023 EV/Revenue estimate, which compares to MVP’s peers who trade at an average of 5.9x.

“We believe the risk/reward profile is compelling at these levels,” he said.