Analysts....In the wake of a “strong but well anticipated” second quarter, Canaccord Genuity analyst Aravinda Galappatthige sees the outlook for Wildbrain Ltd. (WILD-T) improving.On Wednesday, the Halifax-based media company reported revenue of $142.3-million, up 16 per cent year-over-year and ahead of the Street’s $134.5-million expectation. Adjusted EBITDA rose 14 per cent to $29.1-million, topping the consensus estimate of $25.4-million.
We do note, however, that while the $34.3-million benefit to revenue from the licensing of the Peanuts Catalog was factored into our expectations, Q2 EBITDA was also boosted by a $4.4-million benefit from a litigation settlement,” Mr. Galappatthige said. “With that said, the upward revisions to F2022 are mainly intended to reflect the gradual improvement in consumer products, steady underlying growth in proprietary production (further supported by Sonic Prime), and a likely return to growth at WildBrain Spark as we lap the impact of the YouTube ‘Made for Kids’ rules. “Alongside this, we have raised our target ... as we lift our target multiple for content from 9 times to 10 times and TV from 4 times to 5 times, given the broadly ebullient conditions in the market (especially for small caps) and in line with the steep upswing in comps, both in terms of content producers (e.g. TBRD, LGF) as well as broadcasters (e.g. Corus). The multiple increase is also driven by the recent increase in new premium projects including Peanuts with Apple TV+ and the Sonic the Hedgehog deal announced last week. Also note, in the case of WILD, even moderate changes in multiples drive steep swings in target price (both ways) due to the substantial net debt position, which represents nearly half of TEV.”Calling the Sonic the Hedgehog deal “landmark” and seeing the development of other key brands, including legacy offerings, like Strawberry Shortcake, Inspector Gadget and Teletubbies, as a potential catalyst, Mr. Galappatthige raised his target for Wildbrain shares to $2.80 from $1.60, keeping a “hold” rating. The average on the Street is $2.36.“With the broad market rally now manifesting sharply in the small cap space, we have seen both WILD and its comps start to participate quite meaningfully. Its closest Canadian comp – TBRD, is up 172 per cent over the last 12 months while the larger LGF.B is also up strongly of late (up 50 per centover 3 months). This together with the steep impact of even moderate changes to valuation multiples of WILD, drives our target price up sharply,” he said.Other analysts making changes included:* National Bank Financial’s Adam Shine to $3 from $1.80.* Scotia Capital’s Jeff Fan to $3.40 from $2.