• ADTH shares have more than doubled since I first covered the stock last August.
• The company agreed to a buyout at $3.21 per share, and a 33-day “go shop” period expired May 4th.
• During the Go-Shop Period, a second potential buyer emerged with a non-binding offer at $3.35 per share.
• While the balance sheet is in great shape, AdTheorent’s Q1-24 performance missed on both the top and bottom line.
• Given the current share price proximity to both potential buyout offers, I suspect ADTH is essentially at fair value at this point.

When I last covered AdTheorent Holdings (NASDAQ:ADTH) for Seeking Alpha, the company’s stock was trading at a discount to book value. As a company that has already benefited from the technological innovation that has fueled a lot of hype elsewhere in the market, I felt longing ADTH shares was a solid speculative opportunity at a low valuation multiple. This is what I said in my closing summary:

For a company that utilizes machine learning and has a real functioning product that generates revenue in the market, there is absolutely no hype whatsoever with this name from where I sit. I like that. Especially considering the froth we’re currently witnessing in other AI-linked equities.

That call turned out to be a good one and ADTH shares more than doubled a few months later. Currently, we find a very different setup in ADTH shares. In early April, the company announced that it had a take-private buyout offer from Cadent, LLC at $3.21 per share. In the time since that offer, the company has received a second buyout offer from a different entity for $3.35 per share. In this update, we’ll go over the specifics of the proposed deals, Q1 earnings, and why I think the company’s shares are fairly valued at this point.

Buyout Offers

On April 1st, AdTheorent announced it had reached an agreement to be bought out by Cadent, LLC for $324 million in cash, or $3.21 per share. The company noted the offer price represented a 17% premium to the volume-weighted 60-day average stock price of ADTH shares as of March 28th. However, that bid may have actually been unwelcomed by ADTH shareholders as the offer represented a 6% discount to the $3.41 closing price on March 27th.

Nevertheless, Cadent’s buyout of AdTheorent Holdings was unanimously approved by AdTheorent’s board of directors and it was expected that the deal would be finalized within 90 days of the agreement assuming regulatory approval and shareholder vote approval. In the time since the buyout announcement, ADTH shares have generally traded in a tight range between $3.20 and $3.30. To some degree, there is a bit of logic in paying more than the buyout price to own the stock.

As part of the agreement with Cadent, AdTheorent had a 33 day “go shop” period where the company was allowed to solicit higher bids from prospective buyers. That period ended on May 4th. On May 6th, AdTheorent announced that the company had indeed received an additional offer from an undisclosed third party to acquire all outstanding common shares for $3.35 – a 4% premium to May 6th closing price.

According to the press release disclosing the second offer, the “Go-Shop Proposal” is non-binding but allows for the second prospective buyer to engage in due diligence before negotiating a definitive agreement:

If and when AdTheorent notifies Cadent that the board of directors has determined that the Go-Shop Proposal constitutes a Superior Company Proposal, and that it intends to terminate the Merger Agreement in favor of the Go-Shop Proposal, Cadent will be entitled to certain “match rights” under the Merger Agreement prior to any such termination.

Should the Go-Shop Proposal ultimately lead to a definitive agreement, Cadent can match the offer at $3.35. Given the original offer price was actually below market from prior sessions and the subsequent non-binding offer was just 6% higher than Cadent’s, I suspect the gains have been had here. Furthermore, AdTheorent’s latest quarterly earnings wasn’t exactly stellar.

Q1-24 Earnings Miss

At $34.9 million in quarterly revenue, AdTheorent grew revenue by 6.7% year over year. While there was growth, topline missed analyst estimates by over $6 million in the quarter and Q1-24 revenue was down by 41.5% sequentially. We’ve seen AdTheorent produce large fourth quarters before but this was actually a larger sequential decline from Q4 to Q1 than was observed from Q4-22 to Q1-23.

In addition to the disappointing topline number, quarterly opex grew nearly twice as fast as revenue and the company reported a $9.9 million quarterly loss – nearly double the net loss from the prior year. That said, a large portion of that loss was attributable to a $5.8 million change in fair value of warrants. Regardless, operating loss in the quarter was still larger than the prior year by about $2.3 million. Balance sheet-wise, AdTheorent is still in good shape:

With over $69 million in cash and equivalents in addition to $55.2 million in accounts receivable, the company has more than enough capital to manage quarterly cash burn through at least the next year. Furthermore, with just $35 million in total liabilities, AdTheorent’s financial position is terrific. As I see it, the question is what would this company be worth without the Cadent offer or the Go-Shop Proposal?

Valuation

On the valuation side of things, I don’t think we can reasonably argue the stock is cheap any longer as it was when I covered the stock last summer:

Reminder, when I covered the stock last August, Seeking Alpha’s Valuation Grade was “B+.” Now the stock gets a “C-” grade as the share price has rerated to a more reasonable level. While the company trades below sector median in forward EV/Sales, forward GAAP P/E is more than 38x and forward price to sales is 1.56x. The latter of which isn’t egregious. The company’s trailing book value is on par with the sector.

One could argue AdTheorent’s valuation should be richer than sector median as an emerging growth stock. But in that case I would expect better than a 6.7% year over year increase in revenue for an innovative ad tech business that uses machine learning. Thus, I think one could argue we’re at fair value based on the company’s latest business performance. And this brings us to the scenarios from here.

Possible Scenarios

As I see it today, there are three realistic scenarios at play for ADTH holders.

1. The company agrees to a formal buyout agreement with the Go-Shop Party at $3.35 and the Go-Shop Party transaction closes.
2. The company agrees to a formal buyout agreement with the Go-Shop Party and Cadent matches the $3.35 offer.
3. The Go-Shop Party passes on a definitive agreement and the original Cadent deal closes at $3.21 later this year.

I’m not going to attempt to handicap which of these scenarios would be the most likely but I think it’s safe to assume whatever AdTheorent’s board wants to do will be what ultimately happens. The company’s board and management control about 40% of ADTH shares. Meaning it would take a resounding “no” from the rest of the company’s shareholders to derail any buyout arrangement and I don’t see that happening after a disappointing Q1 earnings report. Especially since the company’s stock was trading under $2 as recently as last year.

Final Takeaway

Considering the company’s Q1 performance and what I view as slower growth than would be expected for an innovative ad tech company, I’m actually not all that surprised that AdTheorent managed to only generate one additional buyout proposal during the 33-day Go-Shop period. Given the fact that it’s a non-binding proposal that requires additional due diligence before any potential definitive agreement is reached, I wouldn’t say it’s a guarantee that ADTH shareholders get the exit at $3.35. But whether the exit is $3.21 or $3.35, if you rode this thing up from $1.40 it might be best to just take the win now before any unforeseen negative events derail either the Go-Shop Proposal or the original Cadent agreement. In my view, the stock is already fairly priced given the current underlying business. I’m certainly not calling the stock a “sell,” but I don’t see all that much upside remaining.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I'm not an investment advisor.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post AdTheorent: Fair Value With Or Without A Deal appeared first on Up2info.com.

• AdTheorent’s Q3 earnings show an 8.8% increase in revenue, a 4.8% increase in gross profit, and a 32% increase in adjusted EBITDA year over year.
• The company’s self-service platform saw a 28% increase in revenue and a 57% increase in advertiser count.
• Based on the Q3 earnings, we believe the stock continues to be undervalued.
• The next results will be crucial for AdTheorent, as it expects most of the full-year Adjusted EBITDA in Q4.

AdTheorent (NASDAQ:ADTH) is a digital media and advertisement company that is currently trading at all-time lows. Since our last article on AdTheorent, the stock has published their Q3 2023 earnings. While the stock price only moved sideways since our last article, the latest release reaffirms our buy-rating for the stock. We have talked extensively about the company’s history and the balance sheet in our last article. In this article we want to focus on the updates in the Q3 earnings. If you haven’t read our last article, check it out on our profile.

Recap of our last article

In our last article we explained how the stock suffered from the general downtrend in SPAC stocks and the macroeconomic uncertainties in the advertisement industries. We concluded that the stock is undervalued, since the company is debt-free and trading under tangible book value while having a profitable operating business. Due to remaining uncertainties for the advertisement industry, we also concluded that it is important to look out for revenue trends for AdTheorent and also other companies that are doing business in the advertisement industry.

The Q3 earnings in numbers

For the third quarter of 2023 the company reported following numbers:

• Revenue of $40.9m – a 8.8% increase Y/Y
• Gross profit of $18.9m – a 4.8% increase Y/Y
• Adjusted EBITDA of $4.7m – a 32% increase Y/Y

The company’s reported numbers were either at the upper-end of their outlook given in Q2 2023 or, in case of Adjusted EBITDA, even surpassed their outlook.

AdTheorent reported further growth of their self-service platform, reporting a 28% Q/Q revenue increase and 57% advertiser count increase for their self-service platform.

For the balance sheet on September 30, 2023 the company reports a slight decrease in stockholders’ equity from $161.7m to $160.3m. However the stock is still trading at levels quite a bit under the company’s book value.

For the last quarter of 2023 AdTheorent gave an outlook:

• Revenue in the range of $55.0 million to $57.0 million.
• Adjusted Gross Profit of at least 64% of revenue.
• Adjusted EBITDA in the range of $10.0 million to $11.5 million.

In general, we are pleased with the company’s Q3 results as they met or exceeded expectations. We continue to believe that absent of any meaningful negative impact the stock remains undervalued at current prices. The positive trends in Q3 reaffirm our believe.

The Advertising Industry

While the advertisement industry still experiences macroeconomic pressures, companies in general continue to report small improvements compared to prior quarters. With some companies, like Fox and Alphabet, reporting decent improvements in ad revenue in their latest earnings reports, some other companies in the space continue to report flat or slightly decreasing advertisement revenues for the latest quarter.

In general it is safe to say that growth in the industry continues to face pressures, with a total recovery still not being in sight for most industry players. Over the long-term however, most experts still forecast high-single digit yearly grow for the industry.

A big upcoming change for the digital advertising industry as a whole are Google’s plans to end third-party cookies for their browsers. If successful, this will mean a change in advertisers’ targeting capabilities and the need for alternative targeting and tracking approaches like the ones AdTheorent is offering. We continue to believe that the cookie ban might be a meaningful catalyst for AdTheorent’s business.

Q4 2023 – Make or break

With Q4 traditionally being the strongest quarter for any advertising company, results for the next quarter are very important for AdTheorent. With a revenue outlook in the range of $55m to $57m the company expects to make around a third of the full-year revenue in just this one quarter.

With an increased focus on their self-service platform and the increase in onboarded advertisers throughout the year, we expect those investments to show meaningful impact in Q4. A successful integration to the self-service platform should have positive impact on the company’s scalability and profitability going forward.

We are closely following the events leading up to the Q4 release and the release itself. With the company forecasting most of their Adjusted EBITDA of the year to fall into Q4, we expect a strong quarter. If the company fails to meet or exceed their Q4 outlook by a big margin, we would reconsider our buy-rating for the common stock.

We are also closely following general advertising industry results for Q4 2023. Since AdTheorent is being largely affected my macroeconomic impacts, a recovery for Q4 2023 or, on the other hand, weaker-than-expected revenues for the quarter could have meaningful consequences for the company.

We are also looking forward to any possible announcement of returning capital to shareholders in their full-year release, preferably in the form of share repurchases.

Conclusion

With Q3 being on the upper-end of expectations, we continue to believe that the common stock is undervalued at current prices. With investments into their self-service platforms and strong machine-learning capabilities we believe the company is well positioned to scale in coming quarters. With Q4 being the most important quarter for the company, we are closely following the events of the current quarter. Based on the results for Q4 we will again revisit our rating on the stock.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ADTH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post AdTheorent: Q3 Release Reaffirms Our Bullishness appeared first on Up2info.com.

• AdTheorent, a digital media and advertisement company, is currently trading at all-time lows.
• Despite a profitable operating business, the market is pricing AdTheorent lower than its tangible book value.
• With no debt and ample cash for growth, ADTH presents a reasonable small-cap investment opportunity with limited downside potential.

AdTheorent (NASDAQ:ADTH) is a digital media and advertisement company that is currently trading at all-time lows. With a history of solid, profitable growth, no debt on the balance sheet and plenty of cash to fund further growth, I believe that at current prices ADTH is a reasonable small-cap buy with small downside and decent upside.

The company

Founded in 2012, AdTheorent is a digital media platform which focuses on performance-first, privacy-forward methods to execute programmatic digital advertising campaigns, serving both advertising agency and brand customers. (Source: AdTheorent)

AdTheorent is providing advertising solutions for business clients to allow them to better target their audience and gain valuable insights about user behaviour. The company is using machine learning to allow advertisers to use their solutions while preserving the privacy of the end user. With governments and companies putting a higher emphasis on privacy regarding digital tracking solutions, AdTheorent can offer a more privacy-preserving alternative for digital tracking in some instances.

Using the power of machine learning, the company is claiming to provide their clients with higher conversion rates, more precise targeting and better retargeting capabilities.

A further look into AdTheorent’s different solutions can be found on the website. For our purpose, this high-level overview of what the company is doing should be enough, so I won’t be going into it further for now.

Why is the market pricing AdTheorent lower than book value?

Different macroeconomic fears are creating uncertainty for the advertising market, affecting stocks in the advertising industry. While the S&P 500 Advertising Sub-Index is standing at a -11% return YTD, many smaller cap names in the advertising industry suffered much more.

Some of the concerns are the highly cyclical nature of advertisement. Ad spending is probably one of the first things companies are cutting in an economic downturn. With many being pessimistic about the economy, there is a perceived risk of a decline in revenue for the advertising revenue.

Besides the SPAC, which we will cover later in the article, there are other reasons why AdTheorent specifically is trading so low, besides the overall industry pessimism.

Sitting at a market cap of ~$107m, AdTheorent is considered a Micro-Cap stock. Micro-Cap stocks are generally more volatile and suffer more on industry downturns. Being too small a company to be considered by most institutional funds, there is also little institutional interest. Retail interest too is small for AdTheorent, since the stock is relatively little known, being positioned in a “boring” industry and being a B2B player.

The SPAC

In December 2021, AdTheorent went public with an SPAC merger. The company raised ~$80m of net proceeds in the process and stocks started trading on December 23, 2021 at around 10$ a share.

At ~10$ a share, AdTheorent went public in December 2021 at a market cap of ~$850m, representing a P/E of ~33.5 and an EV/Sales of ~19.3 at that time. Being able to bank on both the SPAC hype and the AI hype, AdTheorent was able to go public at that price, which I consider inflated.

With 2020 and 2021 marking the peak of the SPAC hype the market has experienced over the last couple of years, there has been a lot of pessimism about SPACS since 2022. With the IPOX SPAC index being down about 40% from its 2021 highs, most companies that went public with an SPAC merger have underperformed the market by a wide margin.

Nowadays, companies that went public with an SPAC are in risk of being associated with the majority of other SPAC companies that were overvalued when going public, putting pressure on SPAC companies as a whole.

The inflated starting price combined with the general downturn for SPACs and perceived risks for the advertising industry caused AdTheorent’s stock prices to plummet. The stock is currently sitting at ~1.2$, representing a decline of ~88% from the initial price and a negative year-over-year return of ~36%.

Undervalued and profitable

The global digital advertising revenue as a whole is expected to grow at 13.9% CAGR until 2030. While AdTheorent managed to grow steadily over the past few years, they experienced slowing growth lately. 2022 revenue was only up 0.4% compared to 2021. Also, with revenues in 2023 so far showing year-over-year declines, AdTheorent is still forecasting slight revenue growth in 2023 compared to prior year.

With AdTheorent’s self-service platform posting a quarter-over-quarter revenue increase of 75% in Q2 2023 and their Health service posting a year-over-year growth of 36%, some of their services are growing rapidly.

Even in an environment of macroeconomic fears, the company is still managing to stay profitable, posting a Net Income of $8.1m in Q2, 2023. The company is forecasting an EBIDTA of around $26.5m on the low-end for 2023, after posting an EBIDTA of $22.3m in 2022. Based on the 2023 outlook, the company is currently sitting at an Price-to-EBIDTA of ~4 and Price/Sales ~0.65. Forecasting a Price-to-EBIDTA of 10, there could be an upside of ~2.5x for AdTheorent’s common stock, even without any bottom-line improvements. I couldn’t use Enterprise Value for any of the estimations, since the Enterprise Value right now is 0, factoring in current assets as cash.

With 0 debt on the balance sheet and tangible equity of roughly $115m, at current prices you are buying the company’s assets at a slight discount while getting the operative part of the company basically for free. The company also holds ~$73m of cash ready to either distribute to shareholders or fund future growth.

Based on several awards the company has won and a history of growth, AdTheorent’s ML products could provide an even higher upside in the future. Based on the hard numbers, however, AdTheorent seems to be a reasonable buy even with slowing growth.

What to look out for

Basically, for the next couple of quarters, I am looking out for any surprises. If the company continues to operate at current levels without any big changes, I will stick to my buy rating. Showing strong top-line growth over the next quarters and/or announcements of capital return to stockholders could further strengthen my buy rating.

Especially the results for Q4 2023 will be important, as those months usually are by far the best for advertising companies. Having the full year results, it will also be interesting to see, if the company will propose share repurchases.

If the company shows a further decline in growth or even negative growth, I would start considering changing my rating to hold or sell. At some point, even if a company is trading at below book value, there is simply a risk that the gap will never close. This is especially true, if the company starts burning cash.

Conclusion

In conclusion, AdTheorent seems to be a reasonable buy at current levels, due to the extremely low valuation. The company seems to be trading at this level not because of fundamental issues, but likely due to being a Micro-Cap stock that is very little known, combined with pessimism surrounding SPACs and the advertising industry as a whole.

It could also take a long time for the market to notice this asymmetry or for the company to do something about it. The timeline to achieve returns with the common stock is thereby unknown. Since this stock is a Micro-Cap which also hasn’t been trading for too long, there is also an increased amount of attention needed as dynamics may quickly change.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ADTH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post AdTheorent: Foolishly Trading Under Book Value appeared first on Up2info.com.

• AdTheorent is a programmatic ad platform that utilizes machine learning for ROI optimized ad campaigns.
• Growth was negative in Q2, and the company is now trading at tangible book value.
• Macro headwinds are present, but the balance sheet is solid, and there is no hype around the name whatsoever.

AdTheorent Holding Company (NASDAQ:ADTH) (ADTHW) is a digital media business that touts specialization in programmatic advertising and machine learning. The company went public via SPAC merger back in late 2021 and after a highly volatile first six months of trading, it’s been a slow drip down to tangible book value over the last year:

In this article, we’ll explore what exactly the company does, assess Q2 earnings, look at balance sheet health and a few valuation metrics to consider.

Programmatic Advertising

As a programmatic ad platform, AdTheorent acts as a middleman in the buying and selling of digital ad impressions. In an analog advertising world, ad buying has historically been done through direct publisher/advertiser relationships or through the use of advertising agencies. In a digital world, advertisers (and agencies) have a greater ability to focus buys toward more of a targeted audience rather than buying a publisher or piece of content.

For instance, rather than buying a specific channel or program on network television through a sales representative that may cast a wider net, an advertiser can directly use software with aggregated ad inventory to curate a more precise target with digital programmatic ads. In theory, this form of advertising reduces impression waste and leads to better outcomes for the ad campaign.

AdTheorent’s Differentiation

I mention impression waste reduction as a “theory” because it is not always true that programmatic ad buying achieves this. Back in June, the Association of National Advertisers published the results of a study that indicated as much as 21% of the impressions served during the study’s data collection ended up on “Made For Advertising,” or MFA, websites that lacked any return on spend.

The study concluded that fixing this problem can lead to as much as $20 billion in efficiency gains if the ad industry can weed out the bad actors in the space. In a blog post response to the ANA study, AdTheorent CEO Jim Lawson went into great detail on why the company’s offering is different.

AI is a giant buzzword in the 2023 commercial zeitgeist, but for the past 11 years we have been using and operationalizing advanced machine learning to reduce and eliminate waste in order to drive smart media buying for advertisers.

Simply put, AdTheorent’s system uses machine learning to bid impressions that are optimized specifically for ROI depending on whatever KPI the ad buyer designates in the campaign. This means AdTheorent’s platform is designed to eliminate the kind of impression waste the ANA study highlighted and it verifies that performance through log level data transparency with the clients.

What is also very interesting is the fact that AdTheorent doesn’t use cookies. This is good because Google (GOOG) is phasing out cookies in the Chrome browser. In my view, AdTheorent could be well positioned to take market share from suppliers who aren’t yet prepared for life after cookies.

Q2 Earnings

There’s a bit of a “what’s the catch” feel to ADTH from where I sit and we need not look much further than the company’s recent earnings performance to see some potential issues. In Q2, revenue fell 11.5% from the prior year period to $37.6 million.

The company did guide some softness during the Q1 call and cited macroeconomic pressure that is hurting marketing spend budgets for AdTheorent’s clients. Specifically, the retail and healthcare customers had delays in campaign timing. The company reported a quarterly loss from core operations that was offset by gains from interest and other income.

During the call, the company noted large sequential gains in self-service revenue and connected television revenue, which came in at 75% and 92%, respectively. Gross margin dipped slightly from the previous year but was still 64% of revenue. Leadership attributed the small margin squeeze to introductory pricing for first-time customers and the increased cost of connected TV inventory. Despite what I think can be viewed as a disappointing quarter, the company remained optimistic for the remainder of the year:

And although Q2 revenue was below our internal expectations by approximately $1 million, we are encouraged by the positive trends in bookings and our pipeline opportunities. At this point in the year, our pace for bookings in the second half exceeds the same time last year, up nearly 8% year-over-year, and our pipeline shows strong double-digit growth with more opportunities in advanced stages. These indicators support our confidence in achieving our full year outlook.

The company recently launched a self-service platform function that will allow ad clients with in-house media buyers to interact with the product on their own. However, the overwhelming majority of the company’s revenue still comes from its managed service business line and the two segments were not broken out in the last report.

Balance Sheet and Valuation

From both a balance sheet and valuation perspective, there’s quite a bit to like after what has likely been a brutal selloff for longer term holders. AdTheorent is currently sitting on a sizeable $73.1 million hoard of cash and equivalents.

In aggregate, AdTheorent has $186.9 million in total assets, of which $125.6 million are current with most of the rest being represented by goodwill. Total liabilities are just $25.2 million. $17.2 million of that is current, with most of the rest being lease liabilities that amount to about $1.4 million annually through 2027. However, the company’s New York headquarters lease is the only office lease by the company that has commitments beyond 2025. There is also $2.2 million in warrant liability through the company’s ADTHW shares. The expiration of the warrants isn’t until the end of 2026 and the exercise price is $11.50 per share.

Valuation-wise, AdTheorent gets a B+ grade from Seeking Alpha and has some really attractive multiples, especially against sector peers. The company trades well under book, at a 0.8x sales multiple, and a PE ratio of 8. From where I sit, ADTH is either a really interesting opportunity after an 85% selloff or it’s a value trap.

Risks

As an advertising platform, AdTheorent’s revenue growth and profitability face headwinds if the economy enters a recession. During slowdowns, marketers historically cut spending. It’s reasonable to assume ad spending cuts throughout the broader economy would have a negative impact on AdTheorent’s business, and we’re already seeing signs of that from Q2 earnings results.

Another very legitimate risk in my opinion is the rise of subscription-based content monetization models. We’ve seen through the rise of platforms like Patreon, Substack, and even to a degree Rumble (RUM) that publishers are increasingly hedging the ad-based model and opting for a more direct relationship with their audiences. That’s a potential headwind for the advertising industry more broadly but programmatic ad sellers are likely not insulated from any larger move toward a subscription-based online content model.

Final Thoughts

I actually like this company down here. For investors who have a high risk tolerance and a level of comfort with small caps, I think you can do a lot worse than longing ADTH at a 25% discount to book value. For a company that utilizes machine learning and has a real functioning product that generates revenue in the market, there is absolutely no hype whatsoever with this name from where I sit. I like that. Especially considering the froth we’re currently witnessing in other AI-linked equities. I’m personally keeping positioning somewhat small compared to my other holdings. But I think ADTH is worth a speculative buy.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of ADTH either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

I'm not an investment advisor.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

The post AdTheorent Holding Company: Buy Opportunity Or Value Trap? appeared first on Up2info.com.