Marchex stock is a buy, Roth says

Ahead of the company’s forth quarter results, Roth MKM analyst Darren Aftahi is bullish on Marchex (Marchex Stock Quote, Chart, News, Analysts, Financials NASDAQ:MCHX).

In a research update to clients February 5, the analyst maintained his “Buy” rating and price target of $2.50 on MCHX, implying a return of 85.2 per cent at the time of publication.

“We expect an in-line 4Q, with a return to topline growth on a y/y basis while maintaining adj. EBITDA profitability,” Aftahi said. “Comps begin to ease in 1Q, which is when we expect to see continued traction in auto (despite signs of industry softening) and expansion into adjacent categories begin to drive y/y and sequential improvement in growth and profitability. Improved car volumes would act as an additional growth tailwind, but new vertical traction should aid with revenue ramp and diversification, alongside its new Gen. AI suite.”

The analyst thinks MCHX will will generate EPS of negative $0.14 on revenue of $50.3-million in fiscal 2023. He expects those numbers will improve to an EPS loss of $0.05 on a topline of $54.1-million the following year.

Aftahi thinks it will be a good year for the company.

“2024 may be a transformative year for MCHX under new leadership and easier comps that should result in a return to growth while maintaining or improving profitability,” he wrote. “MCHX has unified its technology stack (under its notion of “one data pipeline” and “one data stack”) and sales efforts to broaden its reach. We believe, in time, its unified technology stack should result in improved GMs. We believe enhanced growth is key to this equation, but it is not unreasonable to think MCHX could boast a 7-handle (%) on gross margin, in time. After all, this is a software-as-a-service solution, that with multiple acquisitions, has skewed on the side of inefficiency.”