Is Illumin stock a buy right now?

Ventum Capital Markets analyst Rob Goff maintained his “Buy” rating on Illumin Holdings (Illumin Holdings Stock Quote, Chart, News, Analysts, Financials TSX:ILLM) but lowered his target price to C$1.90 from C$2.75, saying the Toronto-based ad-tech company’s latest results reflected a sharp revenue mix shift toward lower-margin business lines.

In a Nov. 11 earnings update, Goff said third-quarter EBITDA of C$0.2-million missed his C$1.3-million forecast and the C$1.4-million consensus, even as total revenue of C$38.2-million rose 5.2% year over year and met expectations.

“Disappointing Managed and Self-service revenues hurt momentum and confidence,” he said, adding that the volatility of Exchange Services may weigh on margins until core demand stabilizes.

Illumin, formerly AcuityAds Holdings, provides marketers with a programmatic advertising platform that enables digital campaigns across video, social media, and connected TV.

Revenue growth during the quarter was driven by the Exchange Services segment, which doubled to C$20.5-million, significantly ahead of Goff’s C$14.2-million forecast. Managed Services fell 47% to C$9.4-million, while Self-service revenue was flat at C$8.3-million. Goff said Exchange Services are profitable but more volatile, generating gross margins near 35% compared with roughly 45% for the company’s core Managed and Self-service lines.

“We suspect the decline of Managed can be balanced across the loss of concentrated large accounts and economic headwinds,” Goff said, noting that Self-service revenue would have risen about 15% year over year, excluding one major client loss.

Looking ahead, management plans to reinvigorate growth in Managed and Self-service segments by positioning them as an integrated suite. Artificial intelligence–driven client tools, expected in the first half of 2025, are intended to boost engagement and streamline campaign management.

“A clear re-acceleration in core revenue momentum remains central to rebuilding investor confidence and leveraging a positive re-rating,” Goff said.

Illumin ended the quarter with C$43.2-million in cash after repurchasing 744,108 shares for C$1.2-million year-to-date under its normal course issuer bid. Goff said he expects the company to renew the NCIB when it expires in December.

He described the near-term impact of the results as negative, with the stock down about 7% following the release. However, he said the company’s enterprise value of C$13.9-million and cash per share of C$0.77 represent “an attractive risk/return profile for value investors.”

Goff adjusted his model to reflect the new revenue composition, increasing the Exchange Services weighting to 44% of 2025 revenue from 38%, while reducing Managed Services to 29% from 36%. He lowered his 2025 Adjusted EBITDA forecast to C$1.2-million from C$3.0-million, with 2026 EBITDA reduced to C$3.8-million from C$6.9-million.

He now expects 2025 revenue of C$149.1-million, down from C$154.8-million, improving modestly in 2026 as growth returns to Managed and Self-service operations.

Goff’s revised price target, is based on a discounted cash flow valuation of C$2.06 using a 17% weighted average cost of capital and an 8.5x exit multiple.

He said investors will likely wait for evidence of a turnaround in the company’s core platform revenue, but added that Illumin’s emerging AI capabilities “could play a crucial role in restoring growth momentum and attracting higher-spend clients.”

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