Is Sabio Holdings a buy?

Following the pre-announcement of third quarter results, Beacon Securities analyst Gabriel Leung remains bullish on Sabio Holdings (Sabio Holdings Stock Quote, Chart, News, Analysts, Financials TSXV:SBIO).

On October 7, SBIO announced that it expects its best EBITDA ever and revenue of between $15.5 and $15.8-million U.S. dollars from it forthcoming third quarter.

“On the back of record third quarter revenues, driven by a Connected TV/OTT ad-supported streaming business that continues to grow at double-digit rates, and a leaner and more sustainable operating cost infrastructure, we are pleased to expect to return to full-year positive adjusted EBITDA profitability by end of the third quarter,” CFO Sajid Premji said. “With the historically profitable fourth quarter still to come, we expect record positive adjusted EBITDA profitability for the 2024 fiscal year and greater balance sheet flexibility going into 2025.”

Leung summarized the development.

“In our opinion, the Q3 outperformance was driven (by) Strong organic growth in the Connected TV/OTT business which was up double-digits, stronger y/y contributions from political and advocacy sales (i.e. leading up to the November US Federal elections, strong operating leverage, which was augmented by a cost optimized operating infrastructure,” the analyst wrote. “Given advertising seasonality, along with the lead up to the November 5th US Federal election, we expect to see a notable sequential acceleration in both revenues and EBITDA going into Q4.We believe further multiple expansion will likely be predicated on the company’s ability to maintain its current momentum into CY25, which we expect to get more details on with the Q3 results. The stock is currently trading at 6.5x EV/EBITDA, versus the group at 12x.”

In a research update to clients October 7, Leung maintained his “Buy” rating and price target of $0.70 on SBIO, implying a return of 44% at the time of publication.

The analyst thinks SBIO will post EBITDA of $2.8-million on revenue of $43.2-million in fiscal 2024. He expects those numbers will improve to EBITDA of $3.5-million on revenue of $46.6-million in fiscal 2025.

Disclosure: Sabio is an annual sponsor of Cantech Letter.