Chardan’s McIlree Starts IDI At Buy, $12.50 Price TargetJanuary 13, 2016 | By Fluent
Publication date 1/12/16
The firm started by taking a look into the company’s segments: Internet advertising and data fusion. James McIlree noted that the advertising segment is expected to deliver over $140 million in revenue in 2015, and more than $24 million in adjusted EBITDA. On the other hand, the data fusion business should retrieve “rapid growth in revenue and reduced EBITDA losses over the coming years.”
Notably, the company’s offerings in both segments are quite unique, and the firm expects it to develop new services that use its proprietary databases and algorithms over time.
McIlree then went into the recent Fluent acquisition, which he characterized as “important in an increasingly mobile world” – 70 percent of consumers interact with Fluent properties on mobile devices.
Shares of IDI trade at a 1.5 x EV/Sales ratio below its peers’ average of 3.8x- and an EV/EBITDA ratio of 15.7x – above the average of 12.4x. Chardan attributes the difference to “the drag on EBITDA margins from IDI Data, and as margins improve for both Fluent and IDI Data, the deltas between IDI and the peer group will narrow.” Consequently, the $12.50 price target is “the midpoint of an EV/Sales target multiple rang of 2.5x to 3.8x the low and median of a peer group of stocks applied to our 2016 revenue estimate of $172 million.”