KeyBanc Downgrades Cardlytics On Valuation, Reduced Estimates

Although Cardlytics Inc CDLX reported strong results for the second quarter, its monetization prospects are not as bright as was earlier anticipated, according to KeyBanc Capital Markets.

The Analyst

KeyBanc’s Andy Hargreaves downgraded Cardlytics from Overweight to Sector Weight.

The Thesis

While Cardlytics’ results exhibit strong momentum, the guidance suggests disappointing incremental monetization in the back half of the year, Hargreaves said in a note.

The company reported second-quarter revenue and contribution profit at $48.7 million and $21.1 million, both of which were higher than KeyBanc’s estimates of $44.7 million and $20.1 million, respectively.

Cardlytics achieved solid momentum in both monthly average user (MAU) and average revenue per user (ARPU). Hargreaves added that the company seems to be making good progress in attracting advertisers in new verticals.

He added, however, that the guidance implies monetization of incremental MAU “below our previous expectation” for the back half of the year.

The analyst reduced the revenue and contribution profit estimates for 2019 and 2020 from $87.9 billion to $84.0 billion and from $125.6 million to $105.4 million, respectively.

While saying that Cardlytics seems well positioned to drive customer ARPU higher over time, Hargreaves wrote, “Nonetheless, the increase in the stock price and the reduction to our estimates reduce the risk/reward around the shares and prompt a downgrade in our rating.”

Price Action

Shares of Cardlytics traded around $33.15 at time of publishing on Friday.