Expanding Partnerships And Enhanced Offerings Will Drive Future Earnings In Data Collaboration Platform

Key Takeaways

• Extensive network and partnerships drive revenue growth through data collaboration and personalized marketing solutions.
  
• Enhanced product offerings and strategic focus on efficiencies boost operating margins and earnings trajectory.
  
• Economic uncertainty and IT budget constraints, coupled with delayed technology migration and heavy client reliance, could impact LiveRamp's near-term revenue and profitability.

Catalysts

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

• LiveRamp has a competitive advantage from its extensive network, including over 500 brand advertisers and ad agency customers, and over 500 digital publishers, which is expected to drive future revenue growth through increased data collaboration opportunities.
  
• Expanding partnerships in areas like CTV and with large publishers are anticipated to increase revenue as more advertisers demand personalized marketing solutions.
  
• The company is enhancing its product offerings like first-party identity graphs and new AI partners, which are likely to support higher revenue generation and possibly improve net margins through more efficient, innovative capabilities.
  
• LiveRamp's strategic focus on offshoring and cost efficiencies, alongside addressing technical debt, are projected to contribute to increased operating margins in the future.
  
• The evolving two-sided revenue model, where both publishers and advertisers pay for better insights and value from the platform, is expected to lead to a rise in earnings, supporting an improved earnings trajectory.

LiveRamp Holdings Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming LiveRamp Holdings's revenue will grow by 8.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 0.2% today to 7.9% in 3 years time.
• Analysts expect earnings to reach $71.8 million (and earnings per share of $1.16) by about January 2028, up from $1.4 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 38.6x on those 2028 earnings, down from 1354.6x today. This future PE is greater than the current PE for the US Software industry at 38.4x.
• Analysts expect the number of shares outstanding to decline by 1.73% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.01%, as per the Simply Wall St company report.

LiveRamp Holdings Future Earnings Per Share Growth

Risks

• Economic uncertainty and tight IT budgets in the tech sector could impact client spending on LiveRamp's services, potentially affecting revenue growth.
  
• The delayed urgency in technology migration due to changes in Google's cookie deprecation timeline might reduce the immediate need for LiveRamp's services, impacting near-term earnings.
  
• While optimistic about clean room networks, the slow pace of network scaling and the need for further standardization may hinder rapid revenue growth and expansion of net margins.
  
• Heavy reliance on large clients, such as CTV and retail media, might lead to revenue fluctuations if partnerships are delayed or do not meet expectations.
  
• Increased investments for offshoring and platform modernization, though beneficial long-term, might compress net margins and delay profitability improvements in the short term.

Valuation

• The analysts have a consensus price target of $37.14 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 $24.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $907.4 million, earnings will come to $71.8 million, and it would be trading on a PE ratio of 38.6x, assuming you use a discount rate of 7.0%.
• Given the current share price of $29.97, the analyst's price target of $37.14 is 19.3% 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.