Oppenheimer on productivity: “excess return” at a premium of 42% on the share price


Investment Bank Oppenheimer Started reviewing the stock productivity Network on the recommendation of “over-yield” and quotes a target price of $ 9 per share – which is 42.4% higher than the current price of the stock on NASDAQ.

productivity Provides solutions in the fields of Internet search and digital advertising, and is traded on the Nasdaq and Tel Aviv at a value of $ 166 million.

Oppenheimer writes that productivity Provides advanced data-based advertising solutions for brands and advertisers. “While leveraging its traditional search business, the company has acquired a set of businesses in the field of performance-based advertising,” writes analyst Jason Helfstein of Oppenheimer.

In his estimation, against the background of the corona crisis, the EBITDA (profit excluding interest, tax, depreciation and amortization) of productivity will shrink by 38% this year and revenue will decrease by 13%, but in the next two years it expects growth in both revenue and EBITDA. “We conservatively estimate annual growth of 8% in revenue in 2021,” the analyst writes, estimating growth of 23% in EBITDA in 2021 and 27% in 2022, against the background of higher efficiency of operating expenses. The analyst further mentions the significant improvement in the company’s balance sheet: “In the last three years, the company has taken steps to reduce the debt, and at the end of the second quarter the amount of debt was $ 12.5 million compared to $ 35 million in cash,” he notes.

It estimates the market to which the company is heading at $ 102 billion, of which productivity market share is only 0.3%, a share that will remain stable in its estimation in the coming years as well, but with a possible upside through acquisitions. The acquisitions, he said, also allow productivity to cross-sell and increase efficiency.

The analyst mentions the productivity relationship with Microsoft (Bing) and their collaboration in the launch of Privado, a private search engine that is powered by productivity and strengthens the collaboration between them. The current contract with Microsoft will expire next month but it is expected that it will be renewed. Microsoft was responsible for 63% of productivity revenue in 2019.

The target price is set on the basis of a 9.5 multiplier for EBITDA expected in 2021 and includes a discount relative to similar companies. Investment risks include, among other things, the continued impact of the Corona plague on the advertising industry and possible failures in renewing contracts with significant clients.

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