RAY.A stock is undervalued, Desjardins says

Desjardins analyst Jerome Dubreuil likes what he sees from Stingray Group (Stingray Group Stock Quote, Chart, News, Analysts, Financials TSX:RAY.A).

In a research update to clients January 12, Dubreuil maintained his “Buy” rating and price target of $9.00 on RAY.A stock.

The analyst says a run-up in share price doesn’t change his mind about the value of the stock.

“RAY’s stock has exhibited strong performance since we initiated coverage in mid-September, rising by 19 per cent versus down 2 per cent for its peers; our positive view of the name is unchanged,” he wrote. “We believe this quarter’s focus will be on RAY’s advertising revenue growth, and we see no reason to doubt that guidance of 60-per-cent growth for advertising (retail media + FAST channels) will be achieved. This would represent a meaningful acceleration compared with the 35 per cent reported last quarter and provide some indication of the potential we are seeing in the segment.”

Dubreuil says recent initiatives demonstrate how RAY.A. is more diverse than its public profile would suggest.

“RAY recently announced that it would offer its karaoke product in AFEELA car prototypes, a collaborative initiative involving Sony and Honda,” he said. “While this development is not material in itself, it nonetheless gives RAY a foot in the door with Honda. The company also recently announced the expansion of its partnership with BYD following the successful integration of Stingray Karaoke; the EV car manufacturer will now include RAY’s Calm Radio app in models sold in certain countries. This aligns with RAY’s vision to transform the in-car entertainment industry through a diverse range of offerings, not just with its karaoke product. While in-car entertainment constitutes a small portion of its total revenue (2 per cent), the segment continues to experience strong momentum, contributing to its rapid growth. We note that even the optimistic scenario we presented for in-car entertainment in our initiation report did not include the sale of services beyond karaoke.”

At press time, shares of Stingray were up 1.2 per cent to $6.12.