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Perion (PERI) Revises 2019 EBITDA Guidance on Higher Revenues

Zacks Equity Research

Perion Network PERI recently announced a revision in its 2019 adjusted EBITDA guidance, which is now expected to hit at least $30 million. The revised guidance comfortably exceeds the company’s previous adjusted EBITDA guidance of $25-$27 million.

The improved guidance reflects higher revenues than previously expected. Perion has been benefiting from higher search revenues primarily owing to the unique searches it provides to Microsoft’s MSFT Bing. This has also helped the company attract new publishers to its platform and expand its total addressable market.

Notably, Perion’s Search and other revenues, which accounted for 67.2% of total revenues, jumped 42.6% year over year to $44.2 million in third-quarter 2019.

The company stated that it is mining 13 million search queries per day, thereby improving its ability to provide meaningful insight to customers. This led to growth in revenues per month (RPM) in the last reported quarter.

Will Higher Advertising Spending Aid Perion in 2020?

Perion’s shares have gained a whopping 157% in the past year compared with the industry’s growth of 8.5%. The massive return can be attributed to solid execution, particularly in the search business.

One-Year Performance


 

Notably, Perion’s earnings have beat the Zacks Consensus Estimate in the trailing four quarters, the average positive surprise being 85.1%.

Moreover, the Zacks Consensus Estimate for 2020 earnings is pegged at 52 cents per share, indicating an increase of 35.5% year over year. The consensus mark for revenues is pegged at $265.2 million, suggesting year-over-year growth of 3.2%.

Although the advertising business has disappointed (down 17.6% year over year in the third quarter), estimated higher advertising spending in 2020 bodes well for Perion’s digital branding solution.

Per World Advertising and Research Center (WARC) expectations, cited by Marketing Dive, digital advertising of $336 billion will form more than half of the total global media spending of $656 billion in 2020. The expected 6% growth is much better than a 2.5% increase estimated for 2019, driven by Olympics and higher political advertising related to the U.S. presidential elections. (Read More: 4 Solid Broadcasters to Pick for a Politically Charged 2020)

Alphabet GOOGL is expected to dominate the global ad market with a 23% share, trailed by Facebook and Amazon with 13% and 2.5%, respectively.

Perion, based on its portfolio strength, is well-poised to benefit from higher global ad spending. The company’s focus on integrating Undertone’s display and video offerings with its social media offerings to create a meaningful and trackable cross-channel advertising platform is a key catalyst.

Moreover, the partnership with Pinterest PINS related to Perion’s social media offering is noteworthy. Further, Undertone’s partnerships with the likes of Alphonson and TVadSync help Perion reach a broader audience.

Zacks Rank

Perion currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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