Triple-Digit Top-Line Growth Cements the Bull Thesis for Digital Turbine InvestorPlace - Stock Market News, Stock Advice & Trading TipsAPPS stock might bend, but it shouldn't break, as at least one notable Wall Street analysts paints an optimistic picture...
By David Moadel •
This story originally appeared on InvestorPlace
InvestorPlace - Stock Market News, Stock Advice & Trading Tips
Texas-based Digital Turbine (NASDAQ:APPS) can simplistically be described as on-demand mobile media platform provider. Lately, investors have turned against a number of technology-focused assets, and APPS stock has lost much of its value.
However, just because the share price is declining, this doesn't mean that the company is in trouble. In fact, there's evidence that Digital Turbine is in expansion mode.
As InvestorPlace contributor Stavros Georgiadis pointed out, Digital Turbine acquired three businesses last year. These include AdColony, which provides monetization tools for developers with video, banners and rich media; a mobile app marketing platform called Appreciate; and Fyber, a company that develops ad monetization solutions for mobile publishers.
Clearly, Digital Turbine is getting bigger — but is it getting better? There's at least one prominent Wall Street analyst who apparently sees value in Digital Turbine, so there may be a promising investment opportunity here.
A Closer Look at APPS Stock
Over the past year, APPS stock has wobbled all over the place and made it difficult to apply technical analysis. One thing we can say with certainty is that the stock has a 52-week range of $35.55 to $93.98.
That's a wide range, so expect volatility if you're planning to invest in Digital Turbine. It's wise to keep your position size small at all times.
Another indicator of volatility is APPS stock's five-year monthly beta, which is 2.27. This means that the stock has historically tended to move, in both directions, at least twice as fast as the overall stock market.
Still, if you can tolerate being whipsawed, then an investment in Digital Turbine might be a great contrarian bet. After all, the stock is much closer to its 52-week low than its 52-week high, as it opened at $37.42 on March 9.
The Growth Is Undeniable
According to Digital Turbine, the global mobile advertising market is
estimated to increase in value from $340 billion in 2021 to more than $540 billion in 2025. Of course, the company seeks to capture a sizable swath of this burgeoning market.
Is Digital Turbine succeeding in this endeavor? Admittedly, the selling pressure on APPS stock might be off-putting to some traders. Yet, I invite you to look under the hood and see how the company is doing financially.
As they say, the data doesn't lie. In the third fiscal quarter of 2021, Digital Turbine generated $375.5 million in revenue, representing an eye-popping 324% year-over-year increase on an as-reported basis.
Not only that, but the company reported non-GAAP adjusted EBITDA (earnings before interest, taxation, depreciation and amortization) of $57 million, up 153% year-over-year.
These triple-digit gains provide an effective rejoinder to any skeptics who thought that digital advertising would be a dead market as our relationship with Covid-19 shifts.
A Highly Differentiated Ecosystem
Despite Digital Turbine's success in addressing the demands of the mobile advertising market, there will still be doubters as APPS stock has yet to stage a meaningful comeback.
At least one person on Wall Street, however, is apparently pounding the table in favor of Digital Turbine. In particular, Oppenheimer Chief Investment Strategist John Stoltzfus highlighted Digital Turbine as a potential value play.
To start off, Stoltzfus acknowledged the "current challenging investor sentiment for growth stocks" as well as the "undeniably dynamic environment for adtech."
Fair enough, but then the Oppenheimer analyst offered a powerful bullish argument with startling stats. "APPS remains one of our top 2022 picks at 3.0x FY23E FV/revenue and 16.5x EBITDA vs. 30-40% CAGR," he stated.
What will drive Digital Turbine's continued success, then? Stoltzfus had a cogent answer to this query, explaining, "Potential growth should be underpinned by highly differentiated, independent, end-to-end ad/media tech ecosystem, directly embedded into more than 1.5B devices by handset OEM and carrier partners."
The Bottom Line on APPS Stock
Don't get me wrong — you're not supposed to buy APPS stock just because Stoltzfus likes it.
Rather, the idea is to take the information he presents into consideration, and form your own conclusions. Then, feel free to pick up a few Digital Turbine shares if you see a strong value here like Stoltzfus seems to.
In the final analysis, there's no denying the data that reveals Digital Turbine's top-line growth. Knowing this, investors can start a small position in APPS stock in anticipation of a rebound sooner or later.
On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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