INIK stock has target cut at Beacon

A challenging macro environment has Beacon analyst Gabriel Leung cutting his price target on Ionik (Ionik Stock Quote, Chart, News, Analysts, Financials TSXV:INIK).

On November 27, Ionik reported its Q3, 2023 results. The company posted Adjusted EBITDA of $3.9-million on revenue of $37.6-million.

“Q3 was an eventful quarter which positioned us to complete a meaningful acquisition postquarter-end with SHIFT44,” CEO Ted Hastings said. “We made $4-million in debt principal and interest payments while increasing our cash position through the quarter, which is a testament to our financially resilient business model. We rebranded the company, and added two new executives soon after the quarter which will accelerate our ability to achieve cost savings integrations. As the industry deals with perennial change, we’re staying focused on our long-term vision of creating a data-driven marketing technology company that is profitably assembling a robust, proprietary, first party data warehouse which will be a key element of our platform and our success.”

Leung says the macro environment could lead to changes for INIK.

“We believe the Q3 shortfall relative to our expectations reflected general macro challenges around advertising spend, along with lower US political spend (which should reverse in the coming quarters leading up to the 2024 elections). Drilling into the top line, revenues from managed services and self service (i.e. adtech) was $34.2M, which was down 3.6% q/q (we view y/y as being less relevant given the pace of Ionik’s adtech acquisitions). Meanwhile, in-app purchases and advertising (i.e. the PopReach gaming portfolio) was $3.4M, which was down 6.7% q/q and 14.6% y/y. Subsequent to Q3, the company also discontinued PAYDAY:Crime War, which was originally officially launched during Q2. Given Ionik’s M&A focus around adtech, we believe the company will likely look to divest its gaming portfolio at some point in the future.”

In a research update to clients December 13, Leung maintained his “Buy” rating but cut price target on INIK from $0.55 to $0.40. The new target implied a return of 100 per cent at the time of publication.

The analyst thinks the company will produce EBITDA of $15.0-million on revenue of $161.8-million in fiscal 2023. He expects those numbers will improve to EBITDA of $22.4-million on a topline of $192.6-million the following year.