AI Rollout And IRISTV Acquisition Will Expand Customer Base And Connected TV Capabilities

Key Takeaways

• Viant's acquisition of IRIS.TV and focus on CTV and streaming audio positions it for revenue growth and increased ad spend due to enhanced targeting.
  
• The launch of ViantAI and shift upmarket aim to boost market share, attract larger brands, and improve revenue and margins through efficiency and ease of use.
  
• Reliance on new customer onboarding and emerging technologies could strain margins and revenue, with acquisitions and AI investments presenting integration and resource challenges.

Catalysts

Operates as an advertising technology company.

• The acquisition of IRIS.TV is expected to expand Viant's capabilities in the connected TV (CTV) sector, enhancing targeting precision and contextual relevance which can drive higher CTV ad spend and impact revenue growth positively.
  
• The rollout of ViantAI, an autonomous advertising software, is expected to simplify programmatic ad buying and expand the customer base, including larger and smaller advertisers, thereby potentially increasing market share and revenue.
  
• Increased focus on CTV and streaming audio as major growth areas, with CTV spend growing nearly 50% year-over-year, suggests potential for sustained revenue growth in these fast-expanding channels.
  
• Viant's strategy to move upmarket and attract larger brands due to ease of use and efficiency offered by ViantAI could increase revenue as well as improve net margins through higher-value contracts.
  
• Strengthening its position as a buy-side-only DSP amidst shifts in advertiser preferences towards alternatives to large players such as Google and Trade Desk is likely to drive incremental revenue and market share growth.

Viant Technology Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Viant Technology's revenue will grow by 16.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.5% today to 1.7% in 3 years time.
• Analysts expect earnings to reach $7.2 million (and earnings per share of $0.77) by about January 2028, up from $1.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $14.2 million in earnings, and the most bearish expecting $1.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.1x on those 2028 earnings, down from 247.7x today. This future PE is lower than the current PE for the US Software industry at 40.8x.
• Analysts expect the number of shares outstanding to decline by 47.05% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.99%, as per the Simply Wall St company report.

Viant Technology Future Earnings Per Share Growth

Risks

• The company's reliance on new customer onboarding with increased service levels could result in lower profit margins in the early stages, impacting net margins until customers transition to the percent of spend model.
  
• The acquisition of IRIS.TV, while strategic, is expected to have limited short-term impact on operating results and could lead to integration challenges or unexpected costs, affecting overall earnings.
  
• The focus on ViantAI and rapid expansion into AI might require significant resource allocation and investment, which could strain financials and impact net margins if the anticipated efficiency gains don't materialize quickly.
  
• With increased competition from both established players and emerging technologies in the programmatic and CTV space, there is a risk of pressure on pricing and margins, potentially impacting revenue growth.
  
• Political advertising, while beneficial in the short term, isn't expected to be a significant growth driver, and reliance on specific sectors like CTV may lead to revenue volatility if sector dynamics change unexpectedly.

Valuation

• The analysts have a consensus price target of $21.0 for Viant Technology 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 $27.0, and the most bearish reporting a price target of just $17.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $414.6 million, earnings will come to $7.2 million, and it would be trading on a PE ratio of 32.1x, assuming you use a discount rate of 7.0%.
  
• Given the current share price of $19.17, the analyst's price target of $21.0 is 8.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
  
• 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.