ACUITYADS IS STILL UNDERVALUED, SAYS PARADIGM
TORONTO, ON; NEW YORK, NY, NOVEMBER 20, 2015
A better than expected third quarter has Paradigm Capital analyst Spencer Churchill feeling bullish about AcuityAds (TSXV:AT).
On Wednesday, AcuityAds reported its Q3, 2015 results. The company lost $586,337 on revenue of $5.47-million, a topline that was up 66 per cent over the same period last year.
“We had a record quarter that saw our previous investments into the U.S. and [software-as-a-service]-based self-service businesses contribute significantly to our overall revenue growth,” said CEO Tal Hayek. “In the third quarter, the Acuity team continued to execute effectively on our plan to deliver significant revenue growth, while maintaining a clear path to near-term profitability. Revenues for the quarter increased by 66 per cent while operating expenses decreased by 19 per cent over the same period last year. This revenue growth, coupled with the decrease in our operating expenses, is also a strong indicator of the operational leverage afforded by our business model. We are seeing more and more marketers embracing programmatic as a key enabler of their digital marketing arsenal as they strive to grow their brand and market share, and Acuity is benefiting from this growth.”
Churchill says AcuityAds bested his expectations on both the top and bottom lines. He noted progress in the company’s self-service business, and in its international sales.
“Overall, it was a very impressive quarter and a second consecutive beat following strong Q2 results,” says the Paradigm analyst. “The company has made great strides toward positive EBITDA, with another quarter of materially reduced EBITDA losses, as it continues to benefit from the combination of robust revenue growth and reduced costs. With positive EBITDA on the horizon, more than sufficient liquidity to reach it, and the potential overhang of the debt due in January removed, we expect the stock should continue to move higher.”
In a research update to clients yesterday, Churchill maintained his “Speculative Buy” rating and one-year price target of $1.80 on AcuityAds, implying a return of 100% at the time of publication.