Perion Network Ltd.

PERI Details

Perion Network Ltd. (NASDAQ: PERI) is a global technology company that offers digital advertising solutions to agencies, brands, and publishers. The company operates across the three main pillars of digital advertising i.e., ad search, social media, and display /video / Connected TV (CTV). Through a diversified solutions portfolio, PERI has positioned itself to respond to any changes in which the direction branded and e-commerce spending is headed. The company recently also expanded to an integrated offering branded “Capture and Convince”, which uses Artificial Intelligence (AI) and machine learning to deliver optimized advertising and content to brand-safe sites. As of May 17, 2021, the company’s market capitalization stood at USD 479.61 million.

Launch of an APM System: On May 08, 2021, the company launched an Actionable Performance Monitoring (APM) system, which was deployed to PERI’s high-profile clients including Walt Disney and Havas Media. APM is a SaaS platform that provides clients with a holistic view of their social advertising spends across all networks, agencies, and platforms via a single, easy-to-use interface. Since its launch, APM has been chosen by seven new customers.

Repayment of Debt in Full: On March 08, 2021, PERI fully repaid the outstanding amount of USD 8.33 million (plus accumulated interest) under its loan facility with Bank Mizrahi. As a result, PERI is now debt-free.

Q1FY21 Results: The company reported a 35.9% increase in total revenue to USD 89.8 million in Q1FY21 (ending March 31, 2021) compared to USD 66.1 million in Q1FY20 (ending Mar 31, 2020). Revenue from the Display and Social Advertising segment increased by 60.8% to USD 38.1 million in Q1FY21 vs USD 23.7 million in Q1FY20, primarily due to accelerated growth in revenues from the CTV and Content Monetization solutions. PERI reported a sharp increase of 153.8% in net income (GAAP) to USD 3.3 million in Q1FY21 vs USD 1.3 million in Q1FY20.

Key Risks: Large and established internet technology companies like Google, Facebook, and Amazon play a substantial role in the digital advertising market and may significantly impair the company’s ability to operate in the industry. Moreover, the display of advertisements by PERI’s solutions may be limited or blocked by rapidly evolving advertisement-blocking technologies (ad blockers), which could undermine the viability of PERI’s business.

Outlook: In FY21, PERI expects to generate revenues ranging between USD 390.0 and 410.0 million. Adjusted EBITDA for FY21 is expected to be in the range of USD 39.0 to 41.0 million.

FY21 Guidance (Source: Investor Presentation, May 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

PERI Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Stock Recommendation: PERI has declined 35.21% in the past three months and is currently leaning towards the mid-point of the 52-week range of USD 4.52 to USD 28.32. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 16.90. On the technical chart, the next support level is USD 11.60. Considering the correction in the stock price in the past three months, the successful launch of the APM system, positive outlook for the company, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 14.87, up by 1.16% as of May 17, 2021

* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.