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Have a $13.00 target. GLTA February 25, 2024
VerticalScope Holdings Inc
Company description
Founded in 1999 by CEO Rob Laidlaw and based in Toronto, VerticalScope is a consolidator and aggregator of enthusiast community websites focused on niche communities and hyper-specific subjects. As of 2021, the company owns 1,200+ such communities that collectively reach +100MM monthly active users.
Investment summary
VerticalScope earnings have not been immune to ongoing macro and digital advertising headwinds that could linger through 2024. Nevertheless, we continue to believe the pullback in the shares this cycle more than reflects the earnings impacts with further sequential improvement in operating and financial performance expected in Q4/23 and into 2024 driven by company-specific initiatives. Although some patience may still be required pending a more notable improvement in macro visibility and investor sentiment, we believe current levels represent an attractive accumulation opportunity given solid execution and growing traction on new products combined with a still highly profitable and FCF generative business model.
Potential catalysts for the stock
A return to mid-to-high single-digit organic revenue growth via growth in both MAUs and ARPU
A return to historical EBITDA margins
Renewed success in accretively crystalizing the M&A pipeline
Stronger-than-expected structural tailwinds
A potential takeout premium
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