Roth Capital Upgrades Marchex On Improving Fundamentals, Compelling Valuation

Marchex, Inc. MCHX has been undergoing a period of transformation and should become a growth business in 2019 and beyond, according to Roth Capital.

The Analyst

Roth Capital’s Darren Aftahi upgraded Marchex from Neutral to Buy and raised the price target from $3.40 to $7.

The Thesis

Marchex’s fundamentals have started gaining traction, and both its business and shares have become compelling, Aftahi said in the Sunday upgrade note. 

An uptrend is underway in speech-based analytics revenue, the analyst said. Organic growth in analytics revenue was around 17 percent year-on-year and 8-percent sequentially in Q3, he said.

Analytics revenue has also been boosted by recent acquisitions. With this segment beginning to comprise a major portion of Marchex's revenue base, the company is becoming “a more compelling story given its growth profile; tiered-subscription-based recurring revenue, and higher margin profile,” Aftahi said. 

Marchex has gathered a massive database of first-party conversational analytics data, according to Roth Capital.

Given this and Marchex’s scale, with more than 1,200 brands, the company has differentiated itself, Aftahi said.

While Marchex can use its core dataset to train models and create unique models for clients, other platforms need to purchase the datasets from third-parties in order to train models, the analyst said. 

Price Action

Marchex shares were down 0.51 percent at $3.92 at the time of publication Monday. 

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