Sabio has 400% upside, Eight Capital says

Following the company’s fourth quarter results, Eight Capital analyst Kiran Sritharan has maintained his “Buy” rating on Sabio Holdings (Sabio Holdings Stock Quote, Chart, News, Analysts, Financials TSXV:SBIO).

On April 24, SBIO reported its Q4 and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of (U.S.) $2.1-million on revenue of $12.7-million.

“Despite being a challenging comparable with our success from the 2022 U.S. election cycle and industry-specific events, such as the auto workers strike affecting our number one revenue vertical, Sabio’s resolve to return to meaningful profitability drove over US$2 million in adjusted EBITDA 1 and improvements in gross margins and operating leverage in comparison to the prior year’s quarter,” said CEO Aziz Rahimtoola. “Moreover, our 90% renewal rate for top customers and record upfront commitments so far in 2024 speak volumes to how Sabio continues to position itself as a leader within the ad-supported streaming space. Consumer brands continue to face challenges reaching, engaging, and validating audiences in a fragmented media ecosystem. With traditional pay TV households in the U.S. forecasted to fall 23.5% by 2028 2, Sabio is well-equipped to resolve these challenges through our ability to reach increasingly diverse cord-cutters with authenticity wherever they stream content. We’ve been able to successfully segment ourselves in the market by leveraging proprietary data to generate valuable marketable insights within consumer audiences that conform to a non-cookie-based platform. These insights drive a more powerful connection to target audiences in both brand and political advertising within the ad-supported streaming space. It’s this refined execution approach that delivers measurable ROI spend to our customers.”

The analyst summarized the quarterly results.

“Sabio reported December results ahead of expectations with a positive outlook into 2024, supported by record contracted revenues and pipeline visibility. Growing political ad spend and a broad market recovery may provide further upside to our updated estimates. Cost containment efforts should benefit Sabio in 2024 and return Sabio to full-year profitability. This profitable growth is expected to drive debt reduction and balance sheet flexibility, ultimately improving Sabio’s competitive positioning in the adtech market.”

In a research update to clients April 26, Sritharan maintained his “Buy” rating and one-year price target of $1.50 on SBIO, implying a return of 400% at the time of publication.

The analyst thinks Sabio will post Adjusted EBITDA of (U.S.) $3.6-million on revenue of $47.0-million in fiscal 2024.

“Sabio currently trades at 0.2x, compared to North American ad tech players at 4.1x,” he added. “Risks to our target include incremental softness in the ad spend environment, tightening competitive dynamics and liquidity considerations.”

Disclosure: Sabio is an annual sponsor of Cantech Letter.