Roth Capital: Buy IZEA On Millennial Trends
Roth Capital has initiated coverage on Izea Inc (NASDAQ: IZEA) with a Buy rating and $9 price target, saying that the digital marketing company would benefit from millennial trends.
Izea, with its agnostic platform, should capitalize on the ongoing millennial shift to mobile apps that has given rise to a rapidly growing digital advertising sector in influencer marketing.
"We believe IZEA represents a pure play on the burgeoning content and influencer marketing space, which should be able to grow its topline at least 30% over the next three years, while improving its margin structure as more of its content marketing sales shift from lower-margin news-oriented, to high-margin brand content," analyst Darren Aftahi wrote in a note.
The analyst believes IZEA has first mover advantage and "is only beginning to scratch the surface" of a rapidly growing digital advertising sector that stood at an estimated about $500 million in 2015, and is projected to grow 10-fold to $5 billion by2020 (Source: MediaKix, December 2015).
"We believe what differentiates IZEA is its neutral marketplace network, allowing it to reach all social networking mediums, and scale with brand demand," Aftahi highlighted.
In addition, IZEA has transitioned its recent purchase of Ebyline to a platform that can be used to create content for brands' sites, blogs, apps, etc., commanding better gross margins. The analyst said the brand-content gross margins approximate 30-50 percent, significantly higher than Ebyline's historical 10 percent level.
"In our view, the more sticky IZEA becomes for brand content marketing, the higher probability those brands will want to use IZEA for distribution and promotion of that content via its sponsored social marketing platform, the analyst said.
Aftahi expects a 2016 loss of $1.65 a share and revenue of $28.3 million, while Street estimates loss of $1.63 a share and revenue of $28.3 million.
At the time of writing, shares of IZEA rose 4.04 percent to $7.09.
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