ADCORE Update — Feb 2021
New price target and new developments.
It was a little over three months ago that I wrote my thesis “Can ADCORE be a 40 Bagger?” At that point ADCO.v traded at $0.49 CAD. Today it trades at $2.75 CAD. We have a long way to go to get to a 40 bagger at $19.60 CAD. However, we are on the way now! The train has left the station! ADCORE for the win!
Enough hype now, but seriously this has been exciting. As a result of Covid 19, e-commerce penetration that normally took five years to happen, happened all at once in 2020. E-commerce in the US grew by 44%. While ADCORE has a bigger focus on APAC countries versus the USA, we can assume such trends are happening there as well.
This time of year is agonizing for investors. We have to wait a nasty 4.5 months from mid-Nov to late-Mar to get our next quarterly report. There have been a few things happening with ADCORE in the meantime. Let’s review some things that have happened.
ADCORE Signs Virtus Advisory
ADCORE has signed Virtus Advisory to increase exposure in the Canadian investor community. What is interesting is that AcuityAds hired Virtus Advisory in 2015. Recently AcuityAds stock AT.v has gone from $0.75 CAD to $28 CAD in the last six months. That is almost a 40 bagger. AcuityAds is in the adtech space similar to ADCORE. So hopefully this will be a good match and will help ADCORE.
ADCORE Announces Strategic Initiatives as It Prepares for Dual-Listing in the U.S
This was great news. Every time I want to buy or sell ADCORE I have to call my US broker and have them manually perform the trade over the phone. It is agonizing to those of us used to pushing a button for our buy and sell orders. Although I would love to see ADCORE on the Nasdaq eventually, I welcome this halfway step of going to the OTC. This should bring in a raft of new US investors, pushing the price up, not down.
ADCORE Secures Conditional Approval to List on the Toronto Stock Exchange
I am not as familiar with the Canadian exchanges as in the US, but I believe this to be a big plus to move from the TSXV to the TSX. It may open the door for bigger institutions to buy shares in ADCORE, and definitely will increase the ability of ADCORE to raise funds should they have an acquisition lined up.
ADCORE CEO Omri Brill Interviews Feb 20
This interview with Omri Brill, founder and CEO of ADCORE, on February 20 is possibly the most interesting thing to happen recently. The February 6 investor conference seemed to move the stock strongly, but we don’t know what was said there. However on the February 20 interview from “uncommon SENSE Investor” I found several of the questions very enlightening:
1:41 [Mark] “Now you are in Tel Aviv, Adcore has business in China, Australia, Europe and elsewhere. So you do have a unique insight, I would think, into what the digital advertising market looks like globally. You’ve talked about this huge shift as a result of the pandemic into digital advertising. What have you seen on the ground? Because you’ve been at this for awhile, for about 15 years now.”
2:07 [Omri] “Just recently I saw a very interesting graph from Bank of America, what they did, and basically what that demonstrates is that in the U.S. retail usage by customers there was a shift of growth of about 10 years, a digital transformation, that literally happened in a single quarter during 2020. So also just think about the numbers. What took us 10 years for me, 2010 until say mid-2020, just happening in a single quarter in 2020. So basically it’s like a tsunami of businesses going along, and basically the e-commerce business is exploding. And this is exactly what we are seeing. So it started in Q2. It’s getting even better momentum in Q3 and Q4. I mean now it’s going through the roof.”
I am left mincing words here, but I believe the huge swell of business we saw in Q4 is continuing into Q1.
7:00 [Mark] “Now lastly with the stock, it seems as if investors recently have discovered ADCORE to a degree because it’s had a nice run. What would you say is your impression of the market’s view of ADCORE? And do you think, like a lot of CEO’s think, that their stock is undervalued compared to peers?”
7:15 [Omri] “ADCORE in general tends not to look sideways and we look at ourself, and what we can do, and what I can tell you is a few things. I may be the largest shareholder in ADCORE and didn’t sell a single share yet. So that tells you something about the company’s potential, about what I think about the company’s potential. And another thing that I would say is that ADCORE is still a relatively young company especially in the public market, and the company has huge room to grow. So what we see right now, it’s nothing in a sense. So it doesn’t matter, if ADCORE is trading at $1, $2, it’s all going to look very little, I think in maybe a few months, a few years down the road.”
Indeed I believe Omri Brill, founder and CEO of ADCORE, is right.
Given the bullishness of recent I comments and the strength of the overall e-commerce market I believe that the market is going to re-rate how it values ADCORE even further. At 60% growth YoY, which I believe ADCORE can achieve in 2021, ADCORE gets to $20M USD in revenue. I believe the financial markets will give ADCORE a larger EV / revenue ratio of 20X because of the increased growth rate, their financial strength and profit margin, and the overall size of their market. ADCORE at this valuation will still be trading at a gigantic discount to market leader “The Trade Desk” (Ticker: TTD), which is selling at 47X revenue and has a slowing growth rate of around 48% YoY. While TTD is decelerating in growth, ADCORE is accelerating.
If I take the 20X EV / revenue ratio and multiply it times a revenue rate of $20M USD, I get a total EV of $400M USD. When I divide $400M USD by the outstanding share count of 56M, I get $7.14 USD a share. Given the information available, which granted is based on a lot of conjecture, I believe ADCORE has a strong chance to get to the $7.14 USD price point in 2021. Should they continue to surprise with even stronger revenue growth than the 60%, that target share price would be even larger.
Congratulations on the win so far fellow ADCORE holders! See my article “Portfolio Update — Feb 2020” for some insight on my personal allocation percentage to ADCORE and other companies.