Shaking Up Dynamic Digital Ad Sector By TipRanks
Tremor International Ltd. (TRMR) provides services in the digital advertising field for display, video, CTV and other mediums. Tremor offers a variety of digital advertising platforms, including a demand-side (DSP), supply-side (SSP) and data management (DMP) options. Through its subsidiaries Tremor Video and Unruly as well as RhythmOne and Taptica, it provides a complete solution to publishers and advertisers.
PubMatic and The Trade Desk, two well-known stocks within the sector, are probably familiar to many. Trade Desk focuses primarily on the demand and works with advertisers to maximise their return. PubMatic works with publishers to provide services that focus mainly on the supply end of the equation. Tremor has platforms to facilitate the two sides of transactions. It also offers the DMP for clients. (See Tremor International, Ltd. stock charts on TipRanks)
I am bullish on TRMR stock.
Changes in the Advertising Market
Cord cutting, the decline of satellite and cable television subscribers, is not just a trend. It is a possibility at this stage. The vast majority of Americans younger than 49 years old do not subscribe to traditional TV. Each year, the numbers fall.
This is what has led to mobile apps and connected TV (CTV), which have changed how advertising agencies do business. CTV basically refers to any content that can be accessed via the internet. CTV is essentially any programming that you receive via the internet, if you don’t watch cable or satellite.
Tremor’s vast data management platform can help agencies create highly targeted and data-driven advertising. Tremor’s most important market is CTV. It is not affected by third-party cookies policies and laws. Tremor’s CTV business has seen a significant increase in revenue from $1M to $21M since Q1 2019. It is a substantial portion of Total Revenues and continues to grow each quarter.
Growth in a Growing Addressable Market
This digital advertising industry is expected to reach $455 billion this year and grow to over $700 billion by 2025, according to independent data included in Tremor’s latest earnings presentation for H1 2021. Alphabet and Amazon are the dominant players in this market. There are many smaller competitors that want to be in the top spot and grow. Tremor’s first half of 2021 saw $152M in revenues. It is an increase of 105% over the 2020 period.
A revenue measure called “contribution exc-TAC” is also reported by the company. This means that contribution less traffic acquisition costs or TAC, is what it refers to. It gives a better picture of revenue growth and organic revenues and does not just reflect higher prices passed on to clients. This metric shows that the ex-TAC contribution has increased 126% over 2020, to $137M and $61M respectively. Keep in mind that the COVID-19 epidemic slowed 2020’s business.
Tremor’s stellar growth is also net profitable. This feat is quite impressive considering Tremor’s young growth. In each quarter, the company reported net profits.
Share Price Decline Signals Opportunity
Tremor stock’s share price has recently dipped below $20 per share. This could indicate a buying opportunity. The forward price to sales ratio for TRMR stock is below 5x. This is a good sign that TRMR has been growing at a rapid pace.
Analysts Very Optimistic
Wall Street analysts are extremely bullish on TRMR stock. All five analysts reported by TipRanks have a “buy” rating on the stock. The average Tremor International price target is $29.40. This implies more than 47% upside from the stock’s September 17, 2021 closing price of $19.79. The stock’s $26 target analyst suggests that there is quality upside potential in the near term, even if it has a low price.
Summary on Tremor International
The secular trends in digital advertising are decidedly positive. Advertising agencies will see a shift away from traditional media and more towards CTV and video. Tremor has a wide range of products for advertisers and publishers. Tremor’s business is growing and profitable. TRMR stock is highly valued by analysts and investors may find a compelling opportunity in the recent drawback to $20 per share.
Disclosure: Bradley Guichard owned a position in some of the securities discussed in this article at the time it was published.
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