MediaValet is a Buy, says iA Capital

Digital asset management company MediaValet (MediaValet Stock Quote, Charts, News, Analysts, Financials TSX:MVP) continues to offer investors a compelling risk-to-reward prospect, according to iA Capital Markets analyst Neehal Upadhyaya, who provided a Tuesday update. Upadhyaya kept a “Buy” rating and $1.55 target on the stock, saying MVP has a number of major catalysts coming up.

Vancouver-based MediaValet, which has cloud-native digital asset management (DAM), video content management and creative operations software for enterprise customers, announced its first quarter 2023 financials on Monday. The company reported revenue up 38 per cent year-over-year to $3.9 million, with gross margin at 80 per cent compared to 83 per cent a year earlier and an adjusted EBITDA loss of $2.1 million compared to a loss of $2.6 million a year earlier.

“Our first quarter performance shows a solid start to the year as we continue to both win exciting new customers and attain high net retention rates”, commented Rob Chase, President and CEO, in a press release. “We continue to deliver sustainable growth in the face of challenging economic times and lengthening sales cycles which speaks to the resilience of the DAM market and to our differentiated leadership position.”

Upadhyaya said MVP’s $3.9 million topline was in-line with his $3.8 million estimate and the consensus also at $3.8 million, while adjusted EBITDA at negative $2.1 million was lower than expected, with iA Capital calling for negative $1.4 million and the Street at negative $1.8 million.

The analyst noted that adjusted EBITDA margins at 53.1 per cent were the highest they’ve been in seven quarters, showing the company’s cost optimization as it aims to be free cash flow (FCF) positive by the end of the year.

Upadhyaya said MediaValet’s pipeline remains robust.

“Unlike previous quarters where management had suggested that the sales cycles had not been impacted by worsening macroeconomic conditions, the tone was slightly bearish on that front as MVP has had to jump through more hoops to prove the ROI its solution can provide. However, MVP has developed a strong sales pipeline which is 25 per cent larger than what the Company had in the previous quarter, which should alleviate any pressure on the top-line,” Upadhyaya wrote.

The analyst said MVP will be updating its user interface to V5 over the upcoming Q2-Q3 period, which if past history proves correct will result in a boost in revenue.

“We expect the uplift in the DAM product and the Company’s ability to consistently generate positive FCF to be major upcoming catalysts. Furthermore, with MVP trading at just 2.1x our 2024 revenue estimates, well below its peer group average of 5.6x, we continue to believe the risk-to-reward ratio is compelling,” he said.

At press time, Upadhyaya’s $1.55 target represented a projected one-year return of 31.4 per cent.