March 3, 2022

Oppenheimer on Digital Turbine


This first Oppenheimer pick is Digital Turbine, a digital advertising specialist that provides end-to-end products and solutions to facilitate the monetization of mobile content for mobile operators, original equipment manufacturers (OEMs), and third parties. In short, the company brings together publishers, mobile operators and OEMs with app developers and advertisers.

In the past, the company mostly concentrated on preinstalled apps on Android handsets. Now, though, it is a force to be reckoned with in the digital advertising space following several acquisitions which have meaningfully grown its total addressable market (TAM).

The growth was on evidence in the company’s latest quarterly report, for F3Q22. Revenue increased by 323.7% year-over-year to reach $375.4 million, in turn beating the Street’s call of 353.21 million. There was a beat on the bottom-line too, as adj. EPS of $0.49 came in ahead of the $0.43 consensus estimate. And in contrast to many recently, the company’s outlook was sound as well. The FY22 guidance called for revenue in the $1.225 billion and $1.240 billion range, above the Street’s forecast of $1.22 billion.

While the shares got a post-earnings boost, as has befallen the fate of many growth stocks over the past year, shares have taken a real hammering and are down 27% year-to-date.

What this means, according to Oppenheimer’s Timothy Horan is that investors have the opportunity to pick up shares on the cheap.

“Despite current challenging investor sentiment for growth stocks and undeniably dynamic environment for adtech, APPS remains one of our top 2022 picks at 3.0x FY23E FV/revenue and 16.5x EBITDA vs. 30-40% CAGR,” the 5-star analyst said. “Potential growth should be underpinned by highly differentiated, independent, end-to-end ad/media tech ecosystem, directly embedded into more than 1.5B devices by handset OEM and carrier partners.”

Accordingly, Horan rates APPS an Outperform (i.e. Buy), while his $117 price target indicates room for 162% growth over the coming year.

Three other analysts have weighed in on APPS’s prospects over the past 3 months and like Horan they all get behind this name; with 3 additional Buys, the stock boasts a Strong Buy consensus rating. There are plenty of gains projected here too; going by the $94.5 average target, shares will rise by 101% over the one-year timeframe.

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