Zoomd Technologies Ltd V.ZOMD

$4-5 price target

[Blitzkrieg]

ZOMD.VN
 
Negatives:

• Although Management (Omri Bohensky) had previous success in having private companies bought out, they had no idea how to run a public company (IR, filings, marketing, etc.)
• Top line has not grown, markets have stopped valuing it as growth company
• I do not like the warrants they issued in December—but fact of the matter is, they have skin in the game (although a higher strike price would’ve instilled more confidence)…Management has also been working tirelessly on their new self-serve platform, so at least they are not raising their salaries and hurting cash flow.
• The RTO was expensive, $1/share from what I can recall—however this is still cheaper than the traditional IPO route, and shows management’s confidence
• One of the C-suite members went through a divorce this past year, causing liquidation of his stock on the open market which has resulted in extreme volatility in such a thinly traded stock—this is what peaked my interest and entry into the company
• Having said all this, management owns about 30% of the shares from what I can recall, and they have not sold any
• Based on recent news, it appears management has been in ongoing talks of mergers and acquisitions this past year, which likely kept them locked out from buying additional shares

 
Positives

• Company is run extremely lean, negative net debt-clean balance sheet for easy acquisition-leveraged buyout
• Company now has their ducks in a row: revamped website, corporate deck, marketing material, news releases
• Company has signed a multiple month deal with A-labs—they helped with their RTO, and Noah (A-labs) has a strong track record in PR/IR for companies such as NNOX and BEAM—I like him.
• Israeli connection---I personally thought Perion technologies (PERI) may be interested in acquiring this company
• I like their recent acquisition of ‘Performance Revenues’ which will help grow top-line—I like the $500k cash and earn-out deal which will bring onboard much needed human intellectual capital
• Business model:

-2 business segments (advertisers and publishers) and 3 revenue contributors (advertisers, publishers, and Saas)
1) Advertisers- legacy business model (low margin with high revenue), this supports operating costs
2) Publishers- Revenue sharing BUT key is getting first-party data (if we take a closer look at the ad-tech sector-ROKU, MAGNITE, FUBO-are doing well because of having direct relationship with the data
3) Saas: This is the real game changer for ZOOMD and the only one besides ACUITY ADS (which I also own) that is offering this to SMBs. Recurring revenue by charging flat license fee is highly scalable to advertising agencies and end users. This self-serve platform is a cost-effective way for the company to scale globally as they have in-house R&D to support the platform
 
 
Catalysts:

• I expect strong Q4 results; Top line beat, cash flow positive f/y—Entire ad tech industry has benefited from COVID
• Successful Q4 results and scalability of new Saas platform will bring confidence into the company and market will value Zoomd as a high-growth company once again
• Recent acquisition by MGNI has shed light on other acquisition contenders
• I expect 2021 revenues to be roughly $40 million-$50 million, and at an average ev/sales multiple of 10x for a high-growth Saas company, we are looking at a market cap of $400 million—which is 4x the current level and a price target of $4-$5.

[BCdude]

Thanks for the in-depth analysis. I hadn't imagained ZOMD reaching $4.00, but if they execute in the way you suggest I can see the possibility. GLTA

[Blitzkrieg]

Currently trading at less than 2x sales, I really like zomd here...one of the best value plays in ad-tech...I'm looking forward to ER results and growth of its self-serve platform. There's a herd affect in the market, people aren't aware of its products and growth potential yet...I think if an analyst picks it up or Q4 results, this wil be nearly $2!!