Analysts Remain Cautious On Tremor Despite Its Tailwinds, Cut Price Target By 15%

Analysts cut their estimates and price targets on Tremor International Ltd TRMR over a softer outlook amid a challenging macro environment.

Raymond James analyst Andrew Marok maintained Tremor with an Outperform rating and cut the price target from $13 to $11 to account for his more conservative outlook in 2H22 and 2023.

Tremor reported Q2 top-line results below expectations, though EBITDA margins of ~55% of contribution ex-TAC were better than forecast, he said. 

The company's outlook for 2H22 was also well below expectations, as mounting macro concerns are driving a slowdown in advertiser spend on the platform, he noted. 

Tremor highlighted several tailwinds for 2H and beyond, including the FIFA World Cup (for which Vidaa should see a boost from Hisense's tournament sponsorship), U.S. political spending, and the continued growth of AVOD, he noted. However, the analyst thinks the macro slowdown will likely outweigh these factors.

Tremor also expects to close the Amobee acquisition in Q3 and expects the combined company will generate $500 million in contribution ex-TAC in FY23 while driving $50 million in run rate annual cost synergies. 

Despite the 2H expectations reset, Tremor trades at a significant discount to peers in space experiencing considerable consolidation, he added.

RBC Capital analyst Matthew Hedberg maintained Tremor with an Outperform and lowered the price target from $20 to $17 on reduced estimates.

In a challenging macro, Tremor showed the defensibility of its profitability with an adj-EBITDA margin of 55% despite the top-line miss, he pointed out. 

The bright spot outside of profitability came from CTV, which saw spending grow by 30%. Guidance seems prudent accounting for macro-headwinds while remaining conservative around tailwinds which could benefit Q4, he added. 

Laura Martin from Needham reiterated a Buy rating on Tremor, with a price target of $16, and shared key takeaways. 

Firstly, Video revenues will represent over 80% of TRMR's total revenues in 2022. Secondly, CTV will represent about 50% of Programmatic segment revenues, which should drive faster revenue growth than its AdTech competitors.

Thirdly, about 65% of TRMR's net revenues will come from self-service in 2022. Fourthly, TRMR has exclusive rights to some News Corp NWSA video ad units through December 31.

TRMR has about 1 billion unique users/month (i.e., broad reach). About 50% of 2022 net revenues will come from advertisers using TRMR's DSP and SSP together (i.e., end to end).

TRMR handles 100 billion ad requests and 500 terabytes of data each day and delivers 250 million ad impressions, suggesting a high level of big data AI engineering and ad tech stack competence.

Price Action: TRMR shares traded higher by 3.97% at $8.38 on the last check Wednesday.

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