DTGI - Digerati Technologies (DTGI) - Lots Of Moving Parts

Quarterly preview. The company is expected to report its fiscal first quarter results this week. We believe that the results will reflect recent acquisitions and the progress on integration of those acquisitions. We are taking a more conservative view of the integration of those acquisitions, while maintaining our constructive view of the company's operating and roll up strategy.Active in M&A. We believe that the company is aggressively pursuing acquisitions to gain scale, especially in high growth markets. In addition, the company plans to uplist. As such, it is likely that professional and legal fees will be higher than our original estimates, which assumes baseline activity. Our previous estimate was $0.245 million, which could be $0.275 million or higher.Tweaking fiscal Q1 estimates. We are tweaking lower fiscal first quarter adj. EBITDA estimate from $0.372 to $0.292 million and our fiscal second quarter from $0.384 million to $0.309 million to reflect the prospect of temporarily higher integration costs. We anticipate that the added costs will unwind in coming quarters as the company achieves its cost synergies.Flowing through revisions. We are adjusting our fiscal full year 2022 adj. EBITDA from $1.548 million to $1.393 million, flowing through the fiscal Q1 and Q2 revisions.Compelling stock valuation. Near current levels, the DTGI shares trade at 2.1 times Enterprise Value to our 2022 revenue forecast and 23 times Enterprise Value to our 2022 EBITDA forecast, well below its peers. The company’s peers trade at average EV/2022 Revenue and EV/2022 EBITDA multiples of 3.7x and 41.5x, respectively. Our price target of $0.17 represents a roughly 70% premium to current levels and a target EV/2022 Revenue multiple of 2.9x. We believe this price target appears reasonable due to the company’s high growth potential. Read More >>