This analyst just raised his price target on VerticalScope

Toronto-based VerticalScope (VerticalScope Stock Quote, Chart, News, Analysts, Financials TSX:FORA) is showing signs of recovery as digital traffic stabilizes and monetization improves across its enthusiast-community platform.

In a Nov. 7 report, Beacon Securities analyst Gabriel Leung maintained a “Speculative Buy” rating and raised his target price to $7.00 from $5.00, based on an unchanged 6.5x EV/EBITDA multiple, following stronger-than-expected third-quarter results and early indications of a rebound in monthly active users.

VerticalScope, which operates a network of more than 1,200 online communities serving over 70 million registered members, reported third-quarter revenue of US$14.7-million and Adjusted EBITDA of US$6.2-million, beating Beacon’s forecasts of US$14.9-million and US$4.6-million, as well as consensus estimates of US$15.3-million and US$5.0-million.

Total revenue fell 17% year-over-year, reflecting a 25% decline in digital advertising revenue to US$11.7-million, partly offset by a 40% increase in e-commerce revenue to US$3.0-million. Leung noted that advertising softness was linked to lower search-driven traffic, though the company said October’s MAU rebounded to above 90 million, returning to second-quarter levels.

“Management believes the worst is behind it,” Leung said, adding that the company’s own paid-user and direct-growth initiatives, along with early fourth-quarter trends, suggest traffic has begun to recover. Average revenue per user (ARPU) improved to US$0.055, up from US$0.054 in the previous quarter and US$0.049 last year, supported by a healthier traffic mix and new programmatic advertising partnerships.

VerticalScope generated US$5.9-million in free cash flow during the quarter, representing 94% conversion, and exited with US$12.4-million in cash and US$44.7-million in debt, with another US$56-million available under its revolving facility.

Leung said the company’s AI-driven enhancements to its FORA platform are already improving engagement and monetization, and that ongoing data-licensing discussions with AI and large-language-model partners “could provide a new revenue stream.”

VerticalScope maintained its full-year guidance, calling for EBITDA of US$21–24-million and free cash flow of US$20–22-million, implying a strong fourth quarter.

Leung forecasts fiscal 2025 revenue of C$58.3-million and Adjusted EBITDA of C$20.3-million, improving to C$59.4-million and C$21.4-million, respectively, in fiscal 2026.

“VerticalScope’s early signs of traffic recovery, margin strength, and disciplined cost structure support our view that the company is entering a period of renewed stability,” Leung wrote.

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