Shares of digital media company AcuityAds Holdings Inc. (AT-T) hit a record high on Friday amid signs of an advertising spending rebound and rapid shift towards digital marketing platforms.
The Toronto-based company’s stock shot up 16.5 per cent to a high of $7.26 in early trading, before settling back to around $6.75 midday. The stock has roughly doubled in the past month and is up 500 per cent over the past year. The consensus price target it $4.52, according to S&P Capital IQ. Analysts are expected to update their targets and recommendations on the stock after the company reports its third-quarter earnings next week.
AcuityAds has a programmatic marketing platform that helps advertisers connect with their audiences across online display, video, social and mobile campaigns. Advertisers can also use it to manage their purchasing of online display advertising in real-time.
“We continue to see an accelerated shift in advertising spend from offline/traditional media to digital and programmatic post the pandemic, and we think AT is very well positioned to continue capturing a strong share of this spend,” Eight Capital analyst Suthan Sukumar said in a note to clients, citing the company’s stock symbol. He currently has a “buy” on the stock.
Mr. Sukumar notes the stock’s rise on Friday comes alongside “blowout” quarters from industry peers Roku Inc. (ROKU-Q) and The Trade Desk Inc. (TTD-Q), which were up about 12 per cent and 25 per cent respectively in mid-day trading.
“While TTD and ROKU benefited from particularly strong market share gains this period, both saw better than expected ad spend overall across their base,” Mr. Sukumar wrote. “Both firms noted a deliberate shift by advertisers post the pandemic to focus on ad campaign strategies that have measurable and proven ROI [return on investment], and thus are shifting budgets towards programmatic advertising where they can gain this level of transparency – a dynamic we’ve highlighted in our ongoing coverage of AT.”
He also said these companies are expected to have a strong holiday season and notes the fourth quarter is typically the strongest for so-called “adtech.”
AcuityAds is expected to report its third-quarter earnings before markets open on Wednesday and analysts are anticipating revenue of $23.8-million for the quarter ended Sept. 30 and earnings of 2 cents per share, according to S&P Capital IQ estimates. That’s down from revenue $26.8-million a year ago, before COVID hit the economy and advertising market, and a loss of 3 cents per share.
Echelon Capital Markets analyst Rob Goff said in an email the stock’s recent strength is likely due to anticipated revenue growth despite a drop from sectors hard hit by the pandemic, such as travel. Mr. Goff, who has a “speculative buy” on the stock, also says the recent, “pioneering launch” of the company’s Illumin advertising automation platform “has been exceptionally well received.”
Paradigm Capital analyst Daniel Rosenberg describes AcuityAds as “as an attractive investment for long-term shareholders,” even with the recent runup.
“Shares have moved very quickly, with expectations around margin expansion, as well as growth,” he said in an email. “Acuity should benefit from industry tailwinds, which have seen a big surge in digital ad spending with shifting trends in TV viewing habits.”
Mr. Rosenberg, who also has a “buy” on the stock, also said the company’s new Illumin platform “offers strong potential as a new growth channel for next year.”