Q3: Acuity has its Mojo Back - Analyst need to play Catch-upWhat a Quarter, the return to growth in Q3 was even a quarter ahead of my schedule. We are not talking about mid single digit growth. 19% Revenue growth (CAN 37%, US 25% & Other (22)%).
The biggest silver lining of the self serve blow up last year in Europe was the impact on gross margin. When they cleansed the platform the resulting affect on margins was huge. Gross margins in Q3 54% up from 49% YoY. Bodes real well for the future, especially as you look at valuation on a net sales basis.
That Q4 for revenue guide and October Sales figure was a knockout, 8M+ in a single month… are you kidding me. You are now looking at a Q4 revenue guide of 24-26M in revenue when if you look at analyst’s consensus that they are only projecting a 19.7M figure to reach their 57M FY18 revenue estimate. NUMBERS GOING HIGHER!!!
Projecting Out
Estimates going higher revenue and EBITDA on the back of the gross margin figure. For FY ’18 my Bogey is now Revenue of 63.25M (Analysts – 57M) on 3.5M in EBITDA and FY ’19 estimates of 85M (Analysts – 74.5M) on 9.5M EBITDA.
Valuation Valuation Valuation
1.64/Share analyst price target needs to be bumped higher, much higher. Using The Trade Desk in the states on the NASDAQ as the comp makes things just silly. TTD trades at 10.3x FY ’18 Revenue and 7.8x FY ’19 Revenue w 32% Revenue growth.
On my numbers AT.v Trades at 1.4x FY ’18 Revenue and 1.1x FY ’19 Revenue w 33% Revenue growth (All on a comparable net sales basis). Putting that same TTD valuation on AT.v you get a 8.30/share target price or 600% upside.
Clearly this is not going to go up and trade at 8.0x net sales. In my model I use a 4.0x Net Sales (48% media costs) for 4.25/share target price or 260% upside.
Management owns a lot of stock, they must be seeing the price at some of these other companies are getting acquired for a over 5.0x Sales in the space. If someone were to come along and offer a big premium it would be tough to turn down…
Take a look back at the move during the end of 2016 and into the Spring of 2017 when the stock was first discovered going into FY ’16 Q4 print. Same setup and underlying business momentum.
2.00/share by the time the snow melts is very much possible.
LONG