On Monday, BMO Capital Markets raised its rating on MediaAlpha (NYSE: MAX) stock from Market Perform to Outperform and set a price target of $28.00. The firm predicts a significant increase in Transaction Value (TV) related revenue growth for the years 2024 and 2025, especially from auto insurers like Progressive, which are expected to boost their advertising spend well above current market expectations.
The analyst from BMO Capital Markets highlighted that the projected revenue growth is based on an estimated 25.6 times multiple on MediaAlpha's 2025 expected adjusted EBITDA. This valuation is notably higher than MediaAlpha's historical average of approximately 21 times. The optimism is rooted in the anticipation of upward revisions to revenue estimates by over 40% cumulatively for the next two years.
The analyst acknowledged that while MediaAlpha's valuation multiple is projected to be above its historical average, it could normalize in the future as the surge in advertising spending slows down.
MediaAlpha's stock rating upgrade comes with the expectation that the company will experience a sharp increase in revenue growth, driven by a rise in advertising spending from auto insurers.
BMO Capital Markets' analysis suggests that MediaAlpha is positioned to outperform market expectations in the near term, particularly as the company benefits from industry spending dynamics.
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