Cardlytics: A Prime Opportunity In The Digital Advertising Boom

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Pinxter Analytics
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Summary

  • As advertising dollars continue their shift online and companies spend more than ever before to attract new business, there is a need for more accurate targeting and in-store data tracking.
  • Cardlytics operates its Direct platform which analyzes tens of billion of payment transactions annually and provides actual spending habits data to aid targeted advertising by its clients.
  • The company currently leads in the $11 billion direct market and has further expansion opportunities into the $204 billion global digital advertising market.
  • Based on the company's market share, sales and net income growth, I conclude the company has roughly 50% upside potential for 2018 as they grow MAUs at double-digit rates.

Investment Thesis

The digital advertising market is exploding with the boom in internet-based social media on desktop and mobile platforms and marketers are more focused than ever on identifying consumer spending habits for targeted advertising.

In an industry where the majority of consumer spending occurs in-store and more than half of all financial transactions are electronic, companies have a limited view into accurate industry wide and individual-specific trends that allow them to effectively target individuals on online advertising platforms.

As this targeted advertising market takes shape, Cardlytics (NASDAQ:CDLX) has offerings specific to U.S. marketers based on consumer purchase patterns by analyzing tens of billions of transactions every year. This is far more accurate than target audiences from mega advertisers like Alphabet's Google (GOOGL) (GOOG) and Facebook (FB) which offer targeted advertising based on search or comment patterns, but fail to provide unique individual prospects to marketers who may want to get a better bang for their advertising buck.

As a result of the boom in these methods of targeted advertising Cardlytics has been growing sales by mid-double digits for the last 3 years and is approaching profitability as it cuts net loss as a percentage of revenues from over 72% in 2014 to 15% in 2017. As the company continues to enjoy the surge in its market, valued at over $11 billion among the $204 billion global digital advertising market, I believe they are at the forefront of the industry's growth and are set to continue and gain market share. (Source: Company 10-K)

Industry Overview

MAGNA research reports show the digital advertising market increasing around 13% to $204 billion in 2017 as more marketers focus on the internet and social media boom. As the majority of current advertising measures focus on key demographics and other criteria based on their online shopping preferences, there is

This article was written by

Pinxter Analytics profile picture
4.82K Followers
As part of my earnings growth strategy, I invest, trade and write about small under-covered growth companies which don't get much attention from establishment analysts as well as use the strategy to interpret short and long term moves in bigger, well established companies in the United States, Europe and the Asia-Pacific region.-All articles and the information in them are my opinion based on my own research and analysis and should not be taken as investment advice without proper due diligence and advice from a professional financial adviser.

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in CDLX over 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.

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