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Digital Turbine: Rapidly Growing Advertising Player That's Cheaply Valued

Apr. 06, 2021 8:04 AM ETDigital Turbine, Inc. (APPS)41 Comments

Summary

  • Digital Turbine is growing at triple digits and is showing no signs of slowing down.
  • It has been on an acquisition spree as it looks to solidify its offering and increase the lifetime value of each of its preinstalled devices.
  • This stock is priced at 17x forward sales, but this is much cheaper than its two peers.
  • Looking for more investing ideas like this one? Get them exclusively at Deep Value Returns. Learn More »

Omni channel technology of online retail business.
Photo by Blue Planet Studio/iStock via Getty Images

Investment Thesis

Digital Turbine (NASDAQ:APPS) is an application and content discovery mobile advertising platform. More recently, it's made a few meaningful acquisitions that will enhance its reach and breadth.

Digital Turbine

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This article was written by

Michael Wiggins De Oliveira is an energy specialist whose primary focus is capitalizing on “the Great Energy Transition” - the confluence of decarbonization, digitalization with AI, and deglobalization - to achieve greater investment returns. Through his 9+ years analyzing countless companies, Michael has accumulated outstanding professional experience in the energy sector and a following of over 40K on Seeking Alpha.

Michael is the leader of the investing group Deep Value Returns. Features of the group include: Insights through his concentrated portfolio of value stocks, timely updates on stock picks, a weekly webinar for live advice, and "hand-holding" as-needed for new and experienced investors alike. Deep Value Returns also has an active, vibrant, and kind community easily accessible via chat. Learn more.

Analyst’s Disclosure: I am/we are long APPS. 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (41)

R
You say in the article you work off valuation, but don't mention what your current valuation is for APPS that recommends a buy... What do you value it at today?

I am long APPS, so not sharpshooting. I am genuinely curious what you came up with since you have many of the factors estimated that you would need in the article.
Michael Wiggins De Oliveira profile picture
@Ratteau

I bought more yesterday. I don't know if that means anything to you, but I'm fully committed here.

But you have to see if it makes sense to you?
R
@Michael Wiggins De Oliveira It tells me you think its value is higher than yesterday's market price. I do some valuations but admit APPS isn't one of them. For example, for a class in fall 2019, BBBY was $12.53 and my assumptions and forecasts plugged into the valuation models from Dividend, FCF, Residual income, residual income market to book, and FCF for all debt and equity valuations, came out to $21.64 per share. I bought and have been happy. I need to redo my valuation with new data, such as no longer paying dividends, COVID changes, and steps taken from the restructuring, in order to see what its worth today and whether i should accumulate more, take some profits, or get out completely. (and yeah, with today's market sentiment, hard valuations are kind of passe, but I don't think they don't still offer significant insight)

I'm assuming you understand those various models. So many in comments throw out round numbers like its worth $100 or I won't buy above $50 when they are just throwing out round numbers that are close enough to seem right. From your article, it is clear you are not doing that but I'm asking what you think APPS is worth today? Or a range. Maybe you're not allowed by SA to put hard numbers out to protect them against litigation, I honestly don't know. Thanks for the response!
Daytrader77 profile picture
My TTD stock has better profits and valuation and yet it has pulled back really hard..

This will at some point will pullback too.. I'll wait.. it was trading at $7-8 early 2020..
o
I bought some $APPS on the recent downturn. They have an interesting business model and the financial performance was unbelievable. Does anyone know the average length and revenue for their application delivery side? I want to know how sticky is their recurring revenue.
g
Comprehensive revie of digital marketing
open.spotify.com/...
Michael Wiggins De Oliveira profile picture
@gwlscape

Nice. I always have time for invest like the best.
C
Zacks recommended APPS a year ago and unfortunately I sold too soon as it was volatile. They recommend a hold now. An interesting one for you to consider MGA in the same price range p/e 8 or so and Penske PAG. Sell recommendations are for some of our beloved FVRR and FSLY.
R
@Carol S1 APPS, and to a lesser extent SAVA and VXRT, is why I bought Zacks; still have to do own research but they present some gems I'd never have heard about otherwise. Can't argue with 2500% return :)
C
@Ratteau congrats u did good. I should have kept Apps
R
@Carol S1 Oh, I still have it. Even better, 60% of it is in my Roth ;)
j
I have some in 1 account want to start another position should I wait or start nibbling now in your opinion
Romano Intelligence profile picture
Also guys check out another Adtech business called Adcore (ADCO.TO/ADCOF), growing its revenue organically at 220% and is already profitable. They want to become global Martech leader for ecommerce business.
GULP Investment Group profile picture
www.youtube.com/...

In this video they mention the combined companies or DT, AdColony and Fyber should bring DT to just under 1b in revenue bringing the Price to sales below 10
J
@Daniel Croft Thank you! Great to watch. I figured it would be close to $1B. Nice to see Fyber's management commitment to the combined companies.
GULP Investment Group profile picture
@Jnour I liked the fact that it sounded like they had been discussing this plan for almost a year. Also the fact that they are taking DT shares and I presume under some sort of lock-up means they have confidence in execution.
Michael Wiggins De Oliveira profile picture
@Daniel Croft @@Jnour

I also liked that Fiber is staying on for now, as you said, Daniel.

They are not just selling out. They are trying to man the ship too.

The only detraction here is that the stock is up 2,000% in the past year. If it was the same valuation, but the stock had been a steady compounder for more than 10 years, people would be screaming for this stock.

But because it's gone up so quickly, many investors are left with doubts.

Anyway, that's their problem. I'm fully loaded in my concentrated portfolio.
J
Great article. Thank you Michael. It would be great to know what Revenues and Synergies the recent acquisitions bring to the table!!!
GULP Investment Group profile picture
@Jnour www.youtube.com/...

In this video they mention the combined companies or DT, AdColony and Fyber should bring DT to just under 1b in revenue bringing the Price to sales below 10

As mentioned above but wanted to ping you an alert for the answer
Michael Wiggins De Oliveira profile picture
@Daniel Croft

Absolutely amazing video. Thank you for bringing this up.

Seriously great contribution, thanks for finding it and linking it up here.
GULP Investment Group profile picture
@Michael Wiggins De Oliveira got over a third of a mill in this one so I do plenty of searching for any research I can find.
t
First of all, I agree with your thesis regarding the company's growth potential. However, I'm not sure your comparisons are valid based on revenue growth alone. In your comparison APPS looks like the obvious choice over TTD. However, you disregard Trade Desk's perfect fundamentals. TTD's gross margin is around 80%, and their net margin almost 30%. APPS' gross margin is only around 40% (a bit low), and their net margin is 15%. Trade Desk also has a high roe, accelerating growth, tons of cash, relatively low debt, and strong cash flow. About ironSource, to be honest I don't know much about them. Anyway, comparisons aside, the article was great (I'm a follower), and I agree that APPS is a pretty nice pick, with great potential.
t
@tomergat1 Save your breath. The only 'analysis' this guy does is quote p/s and forecasted growth rate.
Michael Wiggins De Oliveira profile picture
@tcw2180

'' The only 'analysis' this guy does is quote p/s and forecasted growth rate.''

Thanks for your comment. Happy investing. Michael
SamSan1 profile picture
I entered APPS at 22 after their Samsung partnerships impact became.clear. TBH I have indirectly worked with DT.
I like Michael's analysis but 1) there are limited pre-installed apps in any decent android phone and 2 others are also installing it - i.e. Samsung can also preload app.
Michael Wiggins De Oliveira profile picture
@sam198518

''2 others are also installing it''

You mention Samsung. Who is the second?
SamSan1 profile picture
@Michael Wiggins De Oliveira I have seen APPS and ironsource competing in the same geo. The geo overlap is limited so far but I expect it to intensify. And btw, arguably the bigger risk is from big OEMs building their own preload biz.
C
Thank you for discussing the company's inner workings. I'm ashamed to admit that of all the stocks I've picked up, this is one of the ones I had the least info on what exactly it did. That, or I had the info at one point and then promptly lost those brain cells in the ensuing months. Either way, thanks for informative article !
GULP Investment Group profile picture
@CrimsonPhoenix Ive watched a lot of people especially on Youtube try to explain what this business does, most get it wrong. Its not one of those companies that is instantly obvious what their service is, Author here is spot on though.
synergen profile picture
This one has been great for selling covered calls.
D
Jeezus did I screw up when @WY Capital and @Shareholders Unite were writing (on SA) about 'get yourself into' APPS last May thru August 2020. I went instead (have stayed) into TTD, and still to this day haven't added any APPS. Grrrrr...stupid is as stupid does.

Sure wish, @Michael Wiggins De Oliveira, this article was more about (haha) APPS falling back to, maybe $40 or something, so my old, clueless butt could buy some APPS without feeling like I am paying an arm and a leg, and/or chasing it.

Thank you for this article, though. Hope all is well in your world and you/yours are in good health.

The best of fortune to us all
S
@D. Rider Let me see if I got this correct. You bought TTD in April/May 2020 and didn't buy any APPS...Price of TTD back then ranged from $150 - $315. The closing price of TTD yesterday was $653.18....and you are whining about missing APPS...Yes I know...APPS was $4-$6.50 and closed yesterday at $81.82...You STILL killed it...IF you have not extracted your Initial Capital from TTD. Consider doing that and pick a spot to purchase some APPS. I need buyers! My Avg. Cost is $54.82 Take a look at MGNI...a CTV play that will be a BEAST. Yesterday MGNI closed at $40.41. Yes, I need buyers of MGNI as well. "old" I'm on my last hair style as well.
Cheers 60
a
@D. Rider It's had some wild swings the last few months. Try to buy when others are selling.
D
@Sixty2nds

Hope you know this old man (only 60? good heavens I am ancient) doesn't extract or trade. Ever. Started investing that way in the mid-70s and am too old, stubborn and cranky to do it otherwise, haha. I buy, I hold, I buy more, I hold even longer. And if those holds start rising over the years, I keep buying more of them. Repeat this behavior as often as possible. The losers? I rarely, if ever, add to them.

Anyway, yeah, I stupidly missed on APPS despite it being presented to me plainly and clearly last summer. Oh well. At least APPS is firmly on my radar now if we get pullbacks either in the stock and/or overall markets over the next few years.

Helps being a patient old fart. Since the 70s, been through too many fun/silly (which they all are given the markets only know how to do one thing over the long-term) exogenous market events to think we won't get another one or two before I finally kick off this blue orb.

All the best!
FirstFIREWealth profile picture
Thank you, brother. Longs $APPS! 🚀🚀🚀🚀🚀
u
What about compared to IACA (taboola)?
J
Taboola is a junk
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