SBIO still very undervalued, Eight Capital says

Its first quarter results are in the book and Eight Capital analyst Kiran Sritharan still thinks there is lots of money to be made on Sabio Holdings (Sabio Holdings Stock Quote, Chart, News, Analysts, Financials TSXV:SBIO).

On May 29, SBIO reported its Q1, 2024 results. The company posted an Adjusted EBITDA loss of $1.3-million on revenue of $6.4-million.

“While cord-cutting continues, the bigger story is the aggressive growth of connected TV/OTT, which we’re capitalizing on with our impressive 29-per-cent YoY growth in the category — outpacing the broader market and leading to market share capture within the ad-supported streaming space,” said CEO Aziz Rahimtoola. “Our focus on operating efficiency has been aided by this shift. Sabio’s connected TV/OTT sales feature larger deals, lower operating expenses and higher customer retention. Additionally, longer campaign lifespans in connected TV/OTT allow us to upsell other high-margin offerings like App Science’s campaign measurement AI, powered by their unique, cookie-free household graph. This innovative solution is particularly well positioned to capitalize on the uncertainty surrounding Google’s cookie deprecation. The positive trends associated with streaming viewership and our connected TV/OTT opportunities are expected to continue throughout and well beyond our 2024 revenue cycle. Complemented with our recently announced record upfront revenue commitments and improved operating leverage, we believe Q1 will provide a springboard to record sales and profitability for Sabio in 2024.”

The analyst summarized the quarter.

“Sabio’s March print met Street expectations and despite the seasonal weakness, the balance sheet and liquidity profile are in a good spot to start the year. CTV revenue grew 29% y/y, highlighting strong demand that could further benefit from an improved operating environment and increasing political spend expectations. Despite competitive pressures, we like that the cost profile remains in check, which we expect to drive predictable EBITDA growth throughout the year.

In a research update to clients May 31, the analyst maintained his “Buy” rating and price target of $1.50 on SBIO.

The analyst thinks the company will post Adjusted EBITDA of $3.7-million on revenue of $47.3-million in fiscal 2024. He expects those numbers will be Adjusted EBITDA of $3.8-million on a topline of $43.1-million in fiscal 2025.

“We are maintaining our BUY rating and our target price of C$1.50 based on 1.5x 2025E EV/revenue. Sabio currently trades at 0.2x, significantly below North American ad tech players,” the analyst concluded.

Disclosure: Sabio Holdings is an annual sponsor of Cantech Letter.