ATY - AcuityAds Stock Has Dropped 46% Over the Last 6 Months: Is it a Buy?
While the broader markets continue to trade near all-time highs, it’s still possible to find stocks that are trailing indices by a significant margin. One such TSX stock is AcuityAds (TSX:AT) (NASDAQ:ATY) , a company valued at a market cap of $588 million.
AcuityAds stock gained went public in July 2014 at a price of $1.55/share. Its shares were rangebound for the next five years, after which the stock gained a monstrous 975% in CY 2020 . Currently, shares are down 46% in the last six months, providing investors an opportunity to buy the dip. Despite the recent pullback, AcuityAds has returned over 500% to IPO investors.
An overview of AcuityAds
AcuityAds provides marketers a solution for omnichannel digital advertising in the programmatic ad space. The global surge in screen time and digital entertainment solutions amid COVID-19 coupled with the growth in Connected TV or ad-based streaming were the key drivers that drove AcuityAds shares to record highs in early 2021. Investors were also optimistic about illumin, which was AcuityAds’s new self-serve platform that launched last October.
In the fourth quarter of 2020, illumin generated $1.5 million in sales, and this figure rose to $5.2 million in Q2 and $8.43 million in the first six months of this year. illumin is a next-gen ad-automation technology offering marketers the ability to plan, buy, optimize and report on ad programs from a single user interface. Now, users can map the consumer journey across devices and communication channels. illumin accounted for 17% of total sales in Q2 and has been a key revenue driver for the company this year.
In the second quarter of 2021, AcuityAds sales stood at $30.2 million, more than 50% higher than its year-ago sales of $19.55 million. In the first six months of 2021, sales rose to $57.73 million, up from $43.77 million in the same period last year.
This rapid growth has also allowed the company to improve its bottom line. In Q2, it reported an operating profit of $2.5 million compared to a loss of $478,000 in the prior-year period. In fact, AcuityAds’s operating income stood at $6.99 million in 2020, and in the first six months of 2021, this figure has surpassed $4.75 million.
A significant portion of the company’s expenses is media costs that consist of ad impressions purchased from real-time ad exchanges or other third parties. In Q2, these costs were $14.47 million, or 48% of revenue.
What’s next for AcuityAds investors?
AcuityAds is forecast to increase its sales by 26.3% year over year to $132.5 million in 2021 and by 23% to $163 million in 2022. Its adjusted earnings per share are estimated to improve from $0.07 in 2020 to $0.28 in 2022.
We can see that Acuity Ads is trading at a forward price-to-2022-sales multiple of 3.6 and a price-to-earnings multiple of 34.5, which are extremely reasonable given its stellar growth forecasts.
Analysts tracking the stock have a 12-month average price target of $19.11, which is 100% higher than its current trading price.
The post AcuityAds Stock Has Dropped 46% Over the Last 6 Months: Is it a Buy? appeared first on The Motley Fool Canada .
Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AcuityAds Holdings Inc.
2021