Connected TV Advertising And Creative Efficiencies Will Drive Long-Term Performance TV Leadership

Catalysts

About MNTN

MNTN provides a self-serve Performance TV platform that enables businesses of all sizes to run measurable, ROI-driven campaigns on connected TV.

What are the underlying business or industry changes driving this perspective?

• Rapid shift of ad budgets toward connected TV and premium streaming content, combined with MNTN's focus on performance outcomes, is expected to support durable double digit revenue growth as TV spend becomes as measurable as search and social. This may lift top line and EBITDA.
• Expanding penetration of small and midsized businesses, evidenced by 67% active customer growth and rising inbound self-sign-ups, increases customer count and cohort depth. This creates a longer runway for compounding revenue and higher net revenue retention.
• QuickFrame AI and the broader creative ecosystem meaningfully lower cost and time to launch TV ads, which could improve win rates, onboarding speed and creative testing. This may translate into higher customer spend intensity and stronger expansion rates that could support earnings growth.
• Growing agency channel and independent performance-focused agency partnerships broaden distribution to mid-market brands that already allocate heavily to digital. This may accelerate adoption, drive larger average budgets and improve operating leverage in sales and marketing.
• Improving unit economics from scale driven buying power, 79% gross margins and disciplined operating expense growth suggest the potential for continued margin expansion, with higher gross profit per dollar of media possibly supporting faster growth in net income and free cash flow.

Assumptions

How have these above catalysts been quantified?

• Analysts are assuming MNTN's revenue will grow by 19.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from -16.5% today to 19.6% in 3 years time.
• Analysts expect earnings to reach $90.1 million (and earnings per share of $1.06) by about December 2028, up from $-44.9 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 32.3x on those 2028 earnings, up from -20.7x today. This future PE is greater than the current PE for the US Media industry at 16.0x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.96%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The long term success of Performance TV depends on sustained growth in connected TV ad budgets. Any macro slowdown in advertising or reversion of spend back to search and social could curb the current 31% to 39% revenue growth trajectory and slow future revenue expansion.
• MNTN is increasingly reliant on small and midsized businesses and self sign up demand. If these customers face tighter marketing budgets or higher churn than expected, ARPU of approximately 20,900 dollars and the expansion rate well above 115% could deteriorate, pressuring revenue and future earnings.
• The strategy hinges on premium streaming supply and relationships with over 200 networks and SSP partners. Changes in publisher pricing power, auction dynamics or direct competition from larger ad tech platforms could compress the currently elevated 79% gross margin and reduce operating leverage and net margins.
• The QuickFrame AI and broader creative ecosystem are central to shortening sales cycles and increasing spend. However, if generative AI creative saturates the market, fails to deliver differentiated performance or faces regulatory or brand safety pushback, advertisers may limit adoption, which would reduce customer budget growth and constrain earnings and free cash flow.
• The business model assumes ongoing efficiency gains in sales and marketing and infrastructure, including the migration to GCP and a long term 75% to 80% gross margin range. Heavier future investment in headcount, marketing or technology than anticipated, or rising cloud and media costs, could erode adjusted EBITDA margins of about 23% today and slow net income growth.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $26.55 for MNTN based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $38.0, and the most bearish reporting a price target of just $18.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2028, revenues will be $459.7 million, earnings will come to $90.1 million, and it would be trading on a PE ratio of 32.3x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $12.7, the analyst price target of $26.55 is 52.2% 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.