AcuityAds Holdings Inc.

AcuityAds Holdings Inc. (TSX: AT) is a leading technology company that provides marketers with a powerful and holistic solution for digital advertising across all ad formats and screens to amplify reach and Share of Attention® throughout the customer journey

Key Updates:

• Encouraging response from the illumin platform: In the recent past, the company reported strong consumer engagement from its illumin platform and reported 42% sequentially growth in Q3FY21. The Management expects the same momentum to continue for the rest of the year and FY22. Moreover, the corporation is focusing on additional emphasis on marketing, sales and product development resources for illumin in order reach a larger number of audiences.
  

• Increase in cash flows: The company reported a higher cash flow of CAD 18.693 million in 9MFY21, higher than CAD 15.991 million in pcp, supported by a net income of CAD 8.807 million in 9MFY21, as compared to a loss of CAD 0.474 million in pcp. The above is likely to support the company’s overall liquidity position.
  

• Management Update: On November 30, 2021, the company announced the appointment of Elliot Muchnik, who is a qualified CPA and CA, as the Chief Financial Officer.
  

• Ample opportunities from the new emerging verticals: During Q3FY21, the company witnessed improved traction from certain segments like pharmaceutical, technology, automotive and direct-to-consumer brands. The above indicates that the group is very well equipped to face the changing industry dynamics, which is a key positive.
  

Q3FY21 Financial Highlights:

• AT announced its quarterly result, wherein the company posted its revenue of CAD 27.484 million, slightly higher than CAD 26.064 million in pcp. The growth was primarily attributable to higher income from Canada and Europe region, partially offset by lower revenue from the United States (prime geography).

• Gross profit stood at CAD 14.252 million, improved from CAD 13.528 million in pcp. The increase was driven higher income, partially offset by higher media costs.
• The quarter was marked by higher sales and marketing expenses, coupled with higher general & administrative expenses. Notably, share-based compensation stood higher at CAD 1.465 million, significantly higher than CAD 0.252 million in pcp.
• The group reported a net income of CAD 3.362 million, as compared to CAD 0.921 million in pcp.

Q3FY21 Income Statement Highlights (Source: Company Report)

Risks: The company’s products are relatively new to the market, and a change in consumer preference due to the availability of new products and services is likely to dampen the company’s overall market share. 

Valuation Methodology (Illustrative): Price to Earnings based

Stock Recommendation:

The company is witnessing positive responses from the leading global brands and bodes and also received overwhelming feedback for the company’s latest offering illumin marketplace. Furthermore, improved demand from certain sectors like travel, leisure and entertainment are likely to support the company’s upcoming performance, which is a key positive. We have valued the stock using the Price to Earnings-based relative valuation method and have arrived at a double-digit upside (in percentage terms). For the said purposes, we have considered peers like Perion Network Ltd, Converge Technology Solutions Corp etc. Considering the aforesaid facts, we recommend a ‘Speculative Buy’ rating on the stock of AT at the last traded price of CAD 4.58 on December 08, 2021.

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.

Technical Analysis Summary:

One-Year Technical Price Chart (as on December 08, 2021). Source: REFINITIV, Analysis by Kalkine Group

*The reference data in this report has been partly sourced from REFINITIV.

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