BMO analyst Daniel Salmon on Monday initiated coverage of ad tech company Innovid with an “outperform" rating.
Citing Innovid’s involvement in the fast growth of connected TV advertising, Salmon set a target price for Innovid stock at $13 a share. Innovid closed Thursday at $6.98 a share.
Innovid started trading as a public company on December 1 following a merger with ION Acquisition Corp. in a SPAC deal valued at $1.3 billion.
In a research note Monday, Salmon said that Innovid’s video-native ad service is seeing “accelerated adoption” because of the shift to CTV by advertisers. Salmon expects the company’s CTV revenue to grow 57% on a compound annual rate over the next two years and for CTV to account for more than 50% of Innovid’s revenue in the next two or three quarters.
Innovid -- ticker symbol CTV -- ”has the most exposure to this secular growth theme in ad tech, and likely the most direct exposure to this platform of any stock outside Roku, Salmon said.
Innovid could also grow revenue by incorporating new dynamic creative and measurement services, Salmon said. It could also garner higher pricing and be able to charge by the device, as opposed to one price for all platforms, creating new income.
Salmon also saw opportunities for Innovid in international markets, including China. Currently, non-U.S revenue is only about 10% of the company’s total.
For all those reasons, Salmon thinks it would be justified for Innovid to trade at a higher multiple than most other ad-tech stocks.
“We believe a premium is justified because Innovid is exhibiting faster top-line growth, has a lower regulatory and platform change risk profile than most ad tech stocks, operates across both the open web and walled gardens, and has been expanding margins quickly and targets 35% for adjusted EBITDA long term,” he said. ■
