Cardlytics Has A Growing Market, 'Capable' Management, KeyBanc Says In Bullish Initiation

Purchase intelligence platform Cardlytics Inc CDLX recently offered its shares to the public in an IPO. The company functions as a bridge between financial institutions and advertisers, facilitating targeted offerings by marketers based on consumer intelligence data, according to KeyBanc Capital Markets. 

The Analytics

After the expiration of Cardlytics' IPO quiet period, KeyBanc's Andy Hargreaves initiated coverage of Cardlytics with an Overweight rating and $23 price target.

The Thesis

A combination of Cardlytics' "capable" management, unique data and secular growth trends in usage and advertiser demand could drive the shares higher, Hargreaves said in a Tuesday note. (See the analyst's track record here.) 

Increasing use of mobile banking has driven Cardlytics' total addressable market, and the growing demand among marketers for targeted ad channels has resulted in a stable secular growth trend for the company, Hargreaves said. The analyst said he sees well-aligned partner incentives as a positive.

Cardlytics is protected by strong barriers to entry, given the need for deep integration among banks, intense banking regulation and existing scale that limits the potential of rivals to match the company's reach and return on investment for advertisers, the analyst said. 

KeyBanc projects 33-percent three-year revenue CAGR through 2020; contribution margin in excess of 40 percent; and largely fixed operating expenditures, rendering the growth profile attractive.

The Price Action

Cardlytics priced its shares at $13 each on Feb. 9 following a 5.4-million share offering. After closing the debut session at $13.37, the stock has gained about 26 percent to date.

Cardlytics shares were up 1.67 percent at $17.08 at the time of publication Tuesday morning. 

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