ad tech stock illumin is a Buy, says Echelon

With the rebrand now behind it, investors can look forward to first quarter results from illumin (AcuityAds Stock Quote, Charts, News, Analysts, Financials TSX:ILLM), previously known as AcuityAds Holdings. In the lead up to the Q1, Echelon Capital Markets analyst Rob Goff issued a report on the Canadian ad tech company on Friday where he remained steadfastly bullish on the company’s revenue trajectory as illumin continues to scale its platform.

Toronto-based illumin, which provides real-time bidding solutions for digital advertising,  completed the switch from AcuityAds on April 18, saying the new branding connotes the sense that the company’s platform lights up the path for sellers to connect with their customers through data-driven advertising.

“As consumer needs evolve it’s essential for brands to have a holistic view of their customers’ journeys and the ability to evolve and pivot their campaigns alongside changing consumer behaviour,” said Tal Hayek, CEO, in a press release.

“illumin lets marketers engage with their customers in a meaningful way at every touchpoint, whether that be through display advertising, native ads, digital-out-of-home or many other digital formats in between,” he said.

Ahead of the company’s first quarter 2023 results due before market open on May 11, Goff said the previous quarter saw impressive outperformance from illumin, with traction coming across both the company’s managed and self-serve revenue importantly representing a “significant de-risking” of the business transition to the illumin platform,” according to Goff.

For the Q1, the analyst is forecasting $25.7 million in revenue and negative $0.85 million in EBITDA against the consensus $25.2 million and negative $0.1 million. For the full 2023 year, Goff has estimated $129 million in revenue and positive $6.0 million in EBITDA.

Goff said recent results from Meta Platforms, where results were better than expected, make for positive data points for companies like illumin.

On valuation, Goff has illumin currently trading at 2022 and 2023 EV/EBITDA of 8.3x and 8.0x, respectively, compared to its advertising peer group at 9.0x and 6.6x, respectively. 

“We believe the current enterprise value of $47.9 million heavily discounts the revenue profile for illumin where revenues have advanced from $26.0 million in 2021 to $53.8 million in 2022 exceeding our forecast at ~$50.0 million for the year,” Goff wrote.

With the update, Goff reiterated a “Speculative Buy” rating and $4.50 target price, which at press time represented a projected return of 123 per cent.