Amobee Integration And GenAI Adoption Will Attract Partners And Boost Audience Engagement

Key Takeaways

• Integration of Amobee’s technology enhances Nexxen's product offerings and strategic positioning, potentially driving growth through partnerships and market recognition.
  
• Strategic data partnerships and CTV growth position Nexxen for increased revenue, market share, and long-term earnings as demand for unique targeting increases.
  
• Nexxen's reliance on partnerships, GenAI integration, and data access exposes it to execution, economic, and regulatory risks that could impact revenue and market stability.

Catalysts

Provides end-to-end software platform that enables advertisers to reach publishers Israel.

• Nexxen's integration of Amobee's technology, data assets, and talent has significantly improved its standing, allowing for enhanced tech products, data capabilities, and CTV services, expected to drive superior results and future revenue growth through strategic partnerships and market recognition.
  
• The company's unique end-to-end platform, comprising a differentiated DSP and SSP, offers cost efficiencies and improved ROI, potentially impacting net margins positively as more partners adopt its multiple solutions.
  
• The planned incorporation of GenAI into Nexxen's platform aims to boost usability and customer returns, which is anticipated to attract more partners and drive revenue growth through enhanced audience engagement and campaign optimization.
  
• Nexxen’s strategic data partnerships, such as those with The Trade Desk and StackAdapt, position it to expand its data licensing revenue channel, driving long-term earnings growth as demand for unique targeting capabilities increases.
  
• Nexxen's significant growth in CTV revenue and its strategic partnerships in this domain, coupled with opportunities from the shift of live sports to CTV, set it up to capitalize on the growing market, potentially impacting both revenue and market share positively.

Nexxen International Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Nexxen International's revenue will grow by 9.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.0% today to 11.2% in 3 years time.
• Analysts expect earnings to reach $50.9 million (and earnings per share of $0.36) by about February 2028, up from $13.8 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 29.2x on those 2028 earnings, down from 45.1x today. This future PE is greater than the current PE for the GB Media industry at 15.9x.
• Analysts expect the number of shares outstanding to decline by 6.77% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.7%, as per the Simply Wall St company report.

Nexxen International Future Earnings Per Share Growth

Risks

• The company's growth success is currently reliant on partnerships and their ability to outperform competitors, such as in the competitive comparison with another major DSP. This reliance on maintaining superior results could present execution risks and potentially impact future revenues.
  
• There is heavy emphasis on incorporating GenAI and enhancing technology. If these innovations fail to deliver the expected value or are outpaced by competitors, Nexxen could face potential revenue challenges or increased costs without a corresponding increase in earnings.
  
• Nexxen is exposed to risks related to macroeconomic or industry changes that may affect its actual results compared to forward-looking statements. Such uncertainties could impact the company's market conditions and profitability.
  
• The integration and reliance on substantial data partnerships, including those with leading OEMs, could become risks if privacy regulations tighten or if data access becomes more restricted, potentially impacting revenue from data-driven solutions.
  
• The company's strategic shift to a Nasdaq-listed ordinary shares structure may face risks if investor interest does not meet expectations or if market conditions change, potentially affecting liquidity and stock volatility, which could indirectly impact perceived company stability and shareholder value.

Valuation

• The analysts have a consensus price target of £9.505 for Nexxen International based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $454.7 million, earnings will come to $50.9 million, and it would be trading on a PE ratio of 29.2x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of £3.9, the analyst price target of £9.5 is 59.0% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.