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BBTV keeps Buy rating with Eight Capital

Quarterly beats across the board are a good sign from Vancouver-based media tech company BBTV (BBTV Stock Quote, Charts, News, Analysts, Financials TSX:BBTV), according to Eight Capital analyst Adhir Kadve, who kept a “Buy” rating on the stock in a Thursday report. Kadve said BBTV continues to trade at a steep discount to its peers, while monetization of its YouTube Shorts segment along with the company’s Plus Solutions should drive revenue higher in 2023.

Founded in 2005, BBTV owns the largest network of YouTube content with 24.5 million assets that attract over 600 million viewers per month. The company released its fourth quarter and full-year financials on Wednesday, featuring total revenue down 22 per cent year-over-year but up 14 per cent sequentially to $108.5 million.

“The fourth quarter saw an acceleration of some important positive key operational and financial trends for the Company,” said Shahrzad Rafati, Chair and CEO, in a press release.

“While total revenues were down 22 per cent year-over-year in Q4 2022, nearly 32 per cent of our traffic came from YouTube Shorts, monetization of which commenced as of February 1st 2023, and as a result of our content acquisition efforts, we expect our viewership to grow in 2023,” she said.

Kadve said the $108.5 million topline was above his forecast at $103.7 million, while gross profit at $9.6 million was ahead of his call at $8.7 million. Adjusted EBITDA at negative $0.8 million was also a beat of Kadve’s forecast at negative $2.2 million.

The analyst said YouTube Shorts viewership trends are now normalizing after the COVID period and the segment now accounts for about 32 per cent of BBTV’s total views. Kadve said monetization will be modest given its early days but he restated management’s belief that over time Shorts will be comparable to its long-form content. 

Meanwhile, Kadve observed that Plus Solutions were strong over the Q4 and Content Management retained a healthy growth pace at 19 per cent year-over-year, with the company signing one of its largest deals ever over the quarter with a large unnamed media conglomerate.

“BBTV reported Q4 results which came in ahead of our expectations across the board,” Kadve wrote. “While Base revenues continue to be impacted by the lack of Shorts monetization, higher margin Plus Solutions saw reaccelerating growth, which drove strong y/y expansion in Gross Margins.”

“F23 should see ramping Shorts monetization throughout the year and continued momentum and on-going investment in Plus Solutions revenue, should drive GM expansion while heightened focus on profitability should drive a narrower adj. EBITDA loss at BBTV,” he said.

With his “Buy” rating, Kadve lowered his one-year target price from $1.75 to $1.00 per share, representing at press time a projected return of 108 per cent. Kadve said BBTV is currently trading at 1.2x 2024’s EV/Gross Profit, which he said is a steep discount to its adtech comparables at 4.2x, media and tech platforms at about 2.3x and streaming and social media platform peers at 5.6x.


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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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