AcuityAds Stock Has Dropped 46% Over the Last 6 Months: Is it a Buy?

AcuityAds is a stock that will attract growth and value investors given its rapid expansion of revenue and profit margins as well as its reasonable multiples.

| More on:
analyze data

Image source: Getty Images

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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends AcuityAds Holdings Inc.

More on Tech Stocks

think thought consider
Tech Stocks

Is CGI Stock a Buy Even With No Dividend Yield?

CGI stock may not have a dividend to speak of. But does that necessarily mean you should ignore this top…

Read more »

A robotic hand interacting with a visual AI touchscreen display.
Tech Stocks

Why Now Is the Time to Invest in Canadian AI Stocks

Are you looking for one of the most solid Canadian AI stocks out there? This one is probably your best…

Read more »

The letters AI glowing on a circuit board processor.
Tech Stocks

Why AI Stocks Should Be in Every Canadian Investor’s Portfolio

AI stocks continue to be one of the best options out there for long-term investing, especially when considering Canadian options.

Read more »

money goes up and down in balance
Tech Stocks

1 “Magnificent 7” Stock I’d Buy Over Nvidia Right Now

Here's why Meta Platforms stock is a better choice for Canadian investors compared to Nvidia in November 2024.

Read more »

A data center engineer works on a laptop at a server farm.
Tech Stocks

3 No-Brainer Data Centre Stocks to Buy With $500 Right Now

Data centres are going to be a huge growth opportunity in the next decade. And these are the top buys.

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

OpenText stock has fallen in the last few years, but that could mean this top tech stock remains an undervalued…

Read more »

AI microchip
Tech Stocks

Celestica Stock: Buy, Sell, or Hold?

Celestica's stock price has rallied 950% in the last five years. Will the AI boom send it even higher in…

Read more »

data analyze research
Tech Stocks

2 Ridiculously Cheap Growth Stocks to Buy Hand Over Fist in 2024

Well Health Technologies is a cheap growth stock to buy for its record-breaking results, massive revenue growth, and profitability.

Read more »