Data Collaboration And Expanding Network Effects In CTV Will Strengthen Future Market Position

Key Takeaways

• Tactical adjustments and improved sales execution drive increased client onboarding, conversion rates, and future revenue growth.
  
• Robust data collaboration growth across expanding markets boosts revenue acceleration and operating leverage, enhancing overall earnings potential.
  
• Market consolidation and operational shifts may challenge revenue growth and margins, with a reliance on tactical improvements posing risks to earnings stability.

Catalysts

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

• The company has made tactical adjustments to its product and go-to-market strategy, resulting in increased ease of use and more efficient onboarding for clients, which is expected to drive future sales momentum and revenue growth.
  
• LiveRamp is benefiting from robust growth in data collaboration demand across fast-growing advertising channels such as CTV and commerce media, which should contribute to sustained revenue acceleration as these markets expand.
  
• Improvements in sales execution and an enhanced sales pipeline are leading to higher conversion rates for new clients and upsells, signaling potential for continued strong revenue growth.
  
• The data collaboration platform is expanding its network effects, with more clients acting as both data consumers and owners, which should further drive revenue and increase operating leverage, impacting net margins positively.
  
• Projected steady margin expansion from optimized cost structures, offshoring savings, and scalable SaaS model revenue will route into increased operating margins, set to reach 20% to 25% in FY '26, boosting overall earnings.

LiveRamp Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming LiveRamp Holdings's revenue will grow by 8.2% annually over the next 3 years.
• Analysts assume that profit margins will increase from -0.3% today to 8.5% in 3 years time.
• Analysts expect earnings to reach $78.0 million (and earnings per share of $1.22) by about March 2028, up from $-2.4 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 40.0x on those 2028 earnings, up from -726.8x today. This future PE is greater than the current PE for the US Software industry at 28.2x.
• Analysts expect the number of shares outstanding to decline by 0.59% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.44%, as per the Simply Wall St company report.

LiveRamp Holdings Future Earnings Per Share Growth

Risks

• The company is experiencing pressure from smaller, lower ACV (Annual Contract Value) customers, due to market consolidation, which could impact future revenue growth.
  
• Shifting several small international customers from a direct to a reseller arrangement has pressured customer count metrics, potentially affecting subscription revenue targets.
  
• The expected deceleration in revenue growth in Q4 to high single digits could indicate challenges in sustaining sales momentum, affecting overall revenue outlook.
  
• Seasonal increases in operating expenses, due to payroll taxes and the RampUp event, might place pressure on net margins and operating income in the short term.
  
• A reliance on tactical improvements to sustain sales momentum may pose a risk if these adjustments do not continue to yield results, potentially impacting earnings stability.

Valuation

• The analysts have a consensus price target of $39.286 for LiveRamp Holdings 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 $50.0, and the most bearish reporting a price target of just $26.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $922.5 million, earnings will come to $78.0 million, and it would be trading on a PE ratio of 40.0x, assuming you use a discount rate of 7.4%.
• Given the current share price of $26.67, the analyst price target of $39.29 is 32.1% 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.