Cloud Adoption And AI Will Drive Privacy Focused Transformation

Key Takeaways

• Expansion into new industries and adoption of usage-based pricing could unlock rapid platform growth, customer diversification, and outsized revenue potential beyond current expectations.
  
• Regulatory trends and AI adoption are strengthening LiveRamp's competitive position, supporting premium pricing, customer retention, margin expansion, and sustained cash flow for strategic investments.
  
• Stricter privacy regulations, tech changes, and client concentration threaten LiveRamp's core business growth, revenue stability, and margins despite ongoing modernization efforts.

Catalysts

A technology company, operates a data collaboration platform in the United States, Europe, the Asia-Pacific, and internationally.

• Analyst consensus expects sales momentum from Cross-Media Intelligence and Commerce Media solutions, but current traction and customer wins suggest exponential network effects are forming; as these tent pole partners bring in new industries and activate massive partner networks in verticals like travel, payments, connected vehicles, and food delivery, revenue growth could scale far beyond consensus expectations.
  
• Analysts broadly agree the new pricing model will drive gradual margin and revenue improvements, but the shift to usage-based, tokenized pricing-with lower entry points and frictionless upsell potential-could trigger a step-function change in deal velocity and platform expansion, unlocking a much larger cohort of SMB and data platform customers, with a multi-year impact on both top-line growth and operating leverage.
  
• The accelerating adoption of AI-enabled analytics and personalization by brands is likely to make LiveRamp's interoperable, privacy-focused clean room infrastructure foundational to the next wave of digital transformation, positioning the company for a disproportionate share of industry spend as enterprises race to enable compliant, real-time data activation for AI-a tailwind not fully captured in current revenue projections.
  
• Tightening regulatory scrutiny on data privacy and identity is actively raising barriers to entry for competitors while increasing the urgency for enterprise clients to adopt trusted first-party data connectivity solutions, further entrenching LiveRamp's leadership and driving premium pricing and retention, which will bolster gross margins and subscription stability long-term.
  
• The compound effects of platform modernization-cloud-native architecture, automation, and offshoring-are not only expanding margins but also dramatically reducing LiveRamp's cost to serve and enabling faster integration with emerging data and AI partners, setting the stage for sustained earnings outperformance and significant free cash flow growth that can support aggressive share buybacks or strategic M&A.

LiveRamp Holdings Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on LiveRamp Holdings compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming LiveRamp Holdings's revenue will grow by 8.2% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 1.7% today to 24.4% in 3 years time.
• The bullish analysts expect earnings to reach $236.1 million (and earnings per share of $2.13) by about August 2028, up from $12.7 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.1x on those 2028 earnings, down from 143.2x today. This future PE is lower than the current PE for the US Software industry at 37.6x.
• Analysts expect the number of shares outstanding to decline by 1.75% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.42%, as per the Simply Wall St company report.

LiveRamp Holdings Future Earnings Per Share Growth

Risks

• The growing global regulatory environment-with stricter privacy laws and consumer protections-puts LiveRamp's core data onboarding and collaboration business at risk of shrinking addressable markets and potential revenue declines in the long term.
  
• Rapid consumer adoption of privacy-enhancing technologies and increased opt-outs threatens the data availability underpinning LiveRamp's solutions, risking weaker client demand and lower future revenues.
  
• The phasing out of third-party cookies and cross-site tracking by major tech platforms could reduce the relevance of LiveRamp's offerings, making client retention and growth more challenging and impacting long-term revenue and earnings growth.
  
• LiveRamp remains heavily dependent on a concentrated group of large enterprise clients, leaving the company exposed to significant revenue volatility and sharp slowdowns if more major clients churn, as indicated by recent known churn events such as Oracle's exit from ad tech, which negatively affected large customer metrics.
  
• Ongoing cost pressures tied to platform modernization, cloud hosting, offshoring, and required investments to stay ahead in compliance and R&D may compress gross margins and limit long-term expansion of net margins and earnings despite current margin improvements.

Valuation

• The assumed bullish price target for LiveRamp Holdings is $51.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of LiveRamp Holdings's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $51.0, and the most bearish reporting a price target of just $28.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $968.3 million, earnings will come to $236.1 million, and it would be trading on a PE ratio of 17.1x, assuming you use a discount rate of 8.4%.
  
• Given the current share price of $27.8, the bullish analyst price target of $51.0 is 45.5% 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.