Illumin Holdings is undervalued, Ventum Capital says

Illumin Holdings’ (Illumin Holdings Stock Quote, Chart, News, Analysts, Financials TSX:ILLM) recent pullback presents a buying opportunity, says Ventum Capital Markets analyst Rob Goff, who maintained his Buy rating and $3.40 target on May 12, pointing to strong second-half momentum, positive engagement trends and potential upside from M&A.

Illumin Holdings’ second-half outlook remains encouraging. He sees potential upside from strategic M&A, noting Illumin’s strong cash position and the opportunity to acquire high-quality targets at attractive valuations.

“Following the positive recalibration of Q3/24 and the significant outperformance in Q4/24 revenue, we view the underlying trends and outlook positively,” Goff wrote. “We recognize it is a second-half story in a market that may not see through potentially negative EBITDA for Q2/25.”

However, he added that building momentum supports expectations for 6% year-over-year revenue growth and $7.5-million in EBITDA in the second half of 2025, up from $5.8-million in the same period last year.

“We would look to revisit these baseline revenue forecasts with positive results,” he said. “The positive implications of 30% YoY growth in ARPU across existing Self-Service clients and the outperforming Exchange revenues at 148% YoY reflect refined go-to-market strategies and additional sales benefiting from new product development. With these changes, new sales personnel are gaining traction within three months versus six previously. Consequently, management looks to continue investing in sales and service enhancements.

“Social media integration with Meta (META-NASDAQ, Not Covered) also looks to be gaining traction where ILLM is unique in the market (which we positively view as something of a trojan horse) and plans to roll out AI forecasting tools across a broader base (competitors apply minimum spend thresholds of ~$5M+) we see expanding product differentiation and client value gains integral in the building momentum. Greater attention to acquisitions could see Illlumin add scale, reach or service enhancement where target valuations are lower for better-quality candidates.”

Goff expects Illumin to generate $6.1-million in adjusted EBITDA on $150.4-million in revenue for fiscal 2025, rising to $12.1-million in EBITDA on $168.5-million in revenue in 2026.

Despite near-term headwinds, Goff said recent quarterly trends and the outlook for the second half of the year remain encouraging.

“After a slow start and ~$2M decline in YoY revenues from a large client currently in a restructuring, revenues of $29.1M exceeded consensus at $27.5M,” he said. “Growth investments led to an EBITDA drain of -$0.4M against the consensus of -$0.7M. Our drain of $2.0M was off the consensus and proved overly cautious. We had revenues of $28.0M with higher expenses. The initial negative market impact seemed to focus on negative EBITDA versus positive leading indicators and investments.”

Goff pointed to strong engagement metrics and product traction as signs of deeper market penetration and growing client value.

“Post Friday’s pullback in the stock, we see an attractive buying window where our expectations and viewpoint on investments and leading indicators differ from the market’s. While Q2/25 looks to post negative EBITDA, we look for a robust H2/25 as revenues ramp and incremental expenses in H1/25 plateau.”

-30-