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Alfi: Solid Growth Potential Lies Ahead

·4 min read

- By Ishan Majumdar

Ad-tech player Alfi Inc. (NASDAQ:ALF) has been unstoppable since the Covid-19 headwinds began to recede. The company has promising artificial intelligence-based technology, which management looks to capitalize on through rideshare advertising. Apart from the device installation efforts in cabs across multiple cities in the U.S. and Europe, management is also in the process of partnering with digital signage and out-of-home advertising companies in various geographies through a software-as-a-service model.

All these methods are expected to directly contribute to the top-line growth of the company in the coming quarters. The uniqueness of the technology lies in the fact that the advertisements presented on AI-enabled devices are automatically selected based on age, gender, mood and other demographic factors, helping advertisers with targeted marketing in an OOH environment. The company is looking to build a reputation through increased transparency and accountability in its offering and has provided a number of updates since its public issue, which took place in May 2021.

Continuous tablet rollout progress

Most recently, the company announced the resumption of the rollout of its AI-enabled tablets in Value Cabs operating in Belfast, Northern Ireland. Value Cabs is one of Belfast's top taxi companies with close to 800 taxis on the operators' license, providing a quality taxi service throughout Belfast and Northern Ireland with professional drivers. The company currently has several hundred AI-enabled tablets installed and plans to expand the service to more vehicles. The steady rollout should work well given the fact that the pandemic-induced restrictions are now easing and countries around the world have begun to relax travel restrictions.

With this move, Alfi's management projects the top line will grow by approximately $9 million annually if they are successful in deploying the tablets in the full fleet of cars, which would be a big step in its growth trajectory. In addition, in early May, the company announced the rollout of its tablets in rideshare vehicles in Miami and 10 other major cities in the U.S. As part of the rollout, Alfi has also provided local Miami businesses with 30 days of free advertising to help support the reopening of the economy and also create stickiness for its product.

Moreover, the company also launched a version 2.0 software, which is faster and lighter, positioning it perfectly for the new demands placed on tablets that are used in public spaces. It is worth highlighting that the cab drivers have an additional incentive to have Alfi's tablets inside their cabs as they earn a revenue share from the advertising income that Alfi's platform generates. The continuous efforts that Alfi's management has been making in increasing its device rollout and helping diverse businesses in building their brands are expected to act as major green flags behind the long-term growth of the company.

Contract with NEOOH

Alfi recently announced that NEOOH, one of the largest out-of-home media companies in Brazil, has selected it to install its AI enterprise SaaS platform solution on digital screens located in airports across Brazil, starting with the Sao Paolo airport as a pilot. This move is said to have come after NEOOH conducted an exhaustive worldwide search to identify the best provider of AI-enabled solutions to the digital-out-of-home advertising marketplace and after a very thorough review process came to the conclusion that Alfi is a company that met its criteria. NEOOH has operated in Brazil for the past 40 years and is among the leaders in digital signage, with more than 10,0000 screens located in airports and bus terminals throughout the country.

This is a big achievement for the company and management is planning to explore additional opportunities to expand to other NEOOH locations. One such expansion would involve the use of close to 1,500 screens at over 350 stores of mobile phone service provider Vivo in Brazil. It is worth highlighting that the NEOOH contract has a revenue generation potential of close to $3 million per annum.

Final thoughts

Alfi: Solid Growth Potential Lies Ahead
Alfi: Solid Growth Potential Lies Ahead

When Alfi got listed, it was described as a zero-revenue company and the purpose of the public offering was to raise funding to expand its offering. Its offering was priced at $4.15, but the stock is now down to $2.95. I believe the market has yet to factor in the revenue flowing in from the deployments of the company's tablets on various ridesharing vehicles as well as the big contract with NEOOH.

A positive top line in the coming quarterly results should definitely inspire some investor confidence. Needless to say, Alfi is a typical micro-cap with low trading volumes and all the underlying risks that are associated with emerging technology companies. However, the management team's updates through the recent press releases appear to be very promising and the stock does look undervalued currently. I believe the company is definitely an interesting play for tech investors with a high risk appetite.

Disclosure: No positions.

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This article first appeared on GuruFocus.