Acuity Ads is a company that has been covered by this blog two times on two separate websites ( in Blogdaleup (wordpress) on October30,2019 and in Workathon (google blogger) on December15,2020).Acuity Ads has come a long way since October30,2019.Back then it's headquarters was in Halifax and thev stock traded at $1.50-$2.00 per share.It's market cap was about $75 million while now it is trading around$9.50 a share with a market cap of $375 million.In 2021 it has traded as high as $26 per share before falling to it's present price.So it has had a market cap in February of $1.5 billion.Now the market cap is about $.5 billion.Many investors had great expectations for Acuity Ads at the start of 2021.
A good part of the reason for this change was explained in the blog dated December15,2020 in Workathon.It suggested that Acuity Ads acquire 3 "content" and advertising small caps.And it appears that they did soAn earlier blog on Wordpress (Blogdaleup dated Oct.30,2019 suggested that AT could benefit from hiring a few new recent graduates with some online experience to work with these 3 new companies.The last blog on Workathon suggested further, that after consolidating operations with the new "content" companies that AT could move to the $13-$15 price range.And this,in fact, occurred.In fact, the stock price moved to as high as $26.Furthermore Acuity made a successful equity offering on the Nasdaq index accompanied by a listing on Nasdaq.
However the future looks like AT will generate more revenues from Ad Automation Technology which uses an AI platform.In fact, in the last quarter Acuity generated almost 20% of revenues from Ad Automation.This has acted to increase margins and lead to a 15p4% increase in adjusted EBITDA over 2020.A previous blog of mine suggested that AT would be wise to acquire an AI technology company like Nex J Systems (market cap of $15 million).As AT only has 60 million shares outstanding.A new equity issue could bring in sufficient capital to purchase a small cap like NexJ.But more equity could dilute earnings.So this blog suggests because AI is such a new field that it engage a few headhunters (likeRobert Half) and hire 10 to 25 new staff including recent graduates and this will cost less and not dilute earnings.
Price Behaviour
For quite a few years Acuity Ads traded around $2 a share.But about a year ago it moved up to a high of $26 in February and then drifted down gradually to it's present $9 level.Earnings have not matched the price behaviour. Scotiaitrade shows their present earnings at $.18 per share.But AT believes that Ad Automation will increase revenues and margins.Perhaps so but only slightly in 2021 without new customers.This stock is expected to stay in a range between $8-$10 a share until yearend without news of an interesting acquisition or a major new customer.The goal of Acuity Ads management is to convince investors that the prospects seen in January and February will be regained in 2022.
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Dale Mcintyre is a freelance writer that works with Motley Fool and Zacks Investment Research.