Say ‘hi tech,’ and it brings up a host of images in the mind’s eye – but exactly what images can depend on whose mind’s eye. Hi tech has molded our digital age, and brought a sea change to scores of industries, advertising included.
Advertising tech, or ad tech, encompasses the full process of running an online ad campaign, from choosing the target to creating the ads to getting them out on the ‘net where they’ll be seen. But ad tech is also much more – it includes data analytics on a scale rarely seen in commerce, including everything from large-scale information mining to fine-tuned, personalized ad targeting. It requires a combination of human skill and enormous computing power.
In short, ad tech requires specialized companies, that know the terrain of their environment and are ready to thrive in it. And that, of course, will bring opportunities for investors. Wall Street’s analysts are always busy, researching and publishing their takes on the market, and lately two 5-star analysts have tapped a couple of ad tech companies as winners in the near future. We’ve used the TipRanks platform to look up the details on these stocks; both are rated as Strong Buys and offer plenty of upside potential in the year ahead. Let's take a closer look.
Digital Turbine, Inc. (APPS)
Frist up, Digital Turbine, is an ad tech software company that develops apps and code to enable growth and monetization in the digital ad field. The company’s software makes it possible for mobile operators to more accurately target content and ads, putting the revenue-generating material directly to the right recipient. The company’s partners include net giants like Amazon (AMZN) and Facebook (FB), as well as LinkedIn, Instagram, Wish, and HBO.
Digital Turbine boasts over 40 operator partnerships, more than 500 advertiser partnerships – and a monthly reach exceeding 1.5 billion hits.
Those are numbers to fuel steady growth, and APPS has seen revenue increase in every quarter for the past two years. In the most recent quarterly report, for Q4 of fiscal year 2021, ending March 31, the company showed $95.1 million in quarterly revenue, or 142% growth from the year-ago quarter. For the full year, the top line grew 126% yoy, to reach $313.6 million. EPS hit 31 cents, more than double the 15 cents reported in 4Q20, and the highest in the past two years.
In another development of importance to investors, Digital Turbine has made two important acquisitions in the past few months. In April, the company completed its acquisition of AdColony, a mobile advertiser with more than 1.5 billion monthly global users. AdColony brings proprietary tech and rich media formats to Digital Turbine’s offerings. The acquisition was in cash, estimated between $350 and $375 million. AdColony is expected to bring in over $58 million in revenue in the first quarter after the completion.
And in May, Digital Turbine completed its acquisition of Fyber N.V., the Berlin-based mobile advertising monetization platform. The acquisition of Fyber brings to the table expertise in mediation and real-time bidding, along with more than 180 programmatic demand partners. The deal was worth approximately $600 million.
Darren Aftahi, covering APPS from Roth Capital, was impressed by the company’s acquisitions and growth ramp, writing, “The core APPS strength and Single Tap ramp is what remains exciting and driving the upside to its 1Q guide above expectations for Fyber, mostly ahead of the potential revenue/cost-synergies that could be realized throughout the year, along with overall global expansion and healthy demand. Risk/reward at ~5x EV’CY22E sales looks highly attractive in light of growth prospects and potential cross-sell catalysts from its slew of acquisitions…”
Aftahi gives the stock a Buy rating, and his price target of $115 implies an upside of 78% for the next 12 months. (To watch Aftahi’s track record, click here.)
Overall, Wall Street is bullish here, as the stock has a Strong Buy consensus rating. That is based on 5 recent reviews, breaking down 4 to 1 in favor of Buy over Hold. The shares are trading for $64.63 and their $107.6 average price target suggests a one-year upside of 66%. (See Digital Turbine’s stock analysis at TipRanks.)
Perion Network, Ltd. (PERI)
The second stock we’re looking at, Perion, is a provider of engagement and monetization apps for web and mobile digital businesses. The company’s reach stretches across the developed world, with offices in, among other places, New York and DC, Chicago, LA and San Fran, Paris, Hamburg, Milan, and the Middle East. Perion’s original product, an email platform, shut down last year; current products enable online content publishing, search monetization, and actionable monitoring. The company’s partner agreements span a range of sectors, and include McDonald’s, Target, NBC, and Visa.
Perion’s success can be measured in its share price appreciation; over the past 12 months, the stock has gained 250%.
That share growth has occurred alongside steady annual revenue growth. A look at PERI’s pattern of quarterly earnings shows that Q4 is typically the highest, with a dip into Q1. This year was no exception, when the top line slipped from $118 million in 4Q20 to $89 million in Q1. Year-over-year, however, the Q1 revenue was up 34%. EPS followed the same pattern, and the Q1 earnings per share of 10 cents was double the 5 cents reported in the year-ago quarter. Perion expects that strong growth to continue, and the company recently pre-announced its Q2 results, predicting yoy revenue gains of 74%.
Growth was the key point seen by Oppenheimer’s Jason Helfstein. He wrote, after the Q1 results, “Perion's 1Q21 results/guidance suggest the company is effectively capitalizing on broad-based digital advertising tailwinds. Search outperformance was the primary driver of 1Q's beat, as PERI delivered a record 17.7M average daily visits (+45% year/year) to MSFT Bing throughout the quarter, driving search revenue +22% y/y vs. 4Q's -4%…. It has now paid off all outstanding debt, finishing the quarter with $128M in net cash…”
Helfstein, who holds TipRanks’ #20 rating among all Wall Street analysts, gives PERI shares an Outperform (i.e., Buy) rating, with a price target of $30 that suggests room for 61% growth ahead. (To watch Helfstein’s track record, click here.)
Once again, we’re looking at a stock with a Strong Buy analyst consensus rating. Perion has 5 reviews on record to support that rating, and they also include 4 Buys and 1 Hold. The shares have an average price target of $28, giving a 50% upside potential from the current share price of $18.63. (See Perion’s stock analysis at TipRanks.)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.