Evercore ISI has initiated coverage on Cardlytics (NASDAQ: NASDAQ:CDLX) with an In-Line rating and set a price target of $4.00.
The firm based its target on an estimated 1.3 times the 2026 expected enterprise value to sales, which is projected to be approximately $323 million.
Cardlytics operates an advertising platform that integrates targeted and incentivized offers within banking applications and websites. The company has established a significant presence in the industry by forming partnerships with four of the top five largest U.S. card issuers. These partnerships are critical to Cardlytics' business model as they are believed to cover over 60% of all card transactions in the United States.
The In-Line rating indicates that Evercore ISI views Cardlytics' stock as likely to perform on par with the average returns of the stocks the firm covers. The $4 price target reflects the firm's view of the company's future revenue potential in relation to its current enterprise value.
Cardlytics' approach to advertising through bank channels provides marketers with a direct line to consumers, leveraging the frequent interactions customers have with their banking apps and websites. This strategy has enabled Cardlytics to carve out a niche in the advertising market, with a focus on offers that are relevant to consumers' spending patterns.
In other recent news, Cardlytics Inc . has unveiled its Q2 2024 financial results, alongside significant changes in its leadership. The purchase intelligence platform noted an uptick in billings by 2% to $110.4 million, but a decrease in revenue by 7% to $69.6 million.
Amit Gupta has been appointed as the new CEO, effective August 16, 2024, and the company has introduced the Insight dashboard, designed to bolster advertiser retention and budget growth.
Despite these changes, Cardlytics maintains its focus on long-term strategy, which includes technology enhancements, cost discipline, and a transition to engagement-based pricing. The company also expects Q3 billings to range between $100 million and $106 million, with revenue forecasts of $56 million to $63 million.
Among other recent developments, the UK segment of the company experienced a significant 33% growth in billings. However, despite an increase in monthly active users to 165.5 million, the average revenue per user saw a 13% decrease.
InvestingPro Insights
Cardlytics' current financial situation and market performance provide additional context to Evercore ISI's recent coverage initiation. According to InvestingPro data, the company's market capitalization stands at $160.49 million, significantly below the enterprise value implied by Evercore's 2026 sales projection. This discrepancy suggests that the market is pricing in considerable uncertainty about Cardlytics' future growth prospects.
The company's recent performance has been challenging, with InvestingPro data showing a 9.21% quarterly revenue decline in Q2 2024. This aligns with an InvestingPro Tip indicating that analysts anticipate a sales decline in the current year. Additionally, Cardlytics is not currently profitable, with a negative operating income of $58.49 million over the last twelve months.
Despite these challenges, Cardlytics maintains a liquid position, with assets exceeding short-term obligations, as noted in another InvestingPro Tip. This liquidity could provide some financial flexibility as the company navigates its growth strategy and partnerships with major card issuers.
For investors considering Cardlytics, it's worth noting that InvestingPro offers 12 additional tips that could provide further insights into the company's financial health and market position. These tips, along with real-time metrics, can be valuable for assessing the stock's potential in light of Evercore's recent rating.
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