Perion Network Is Top Small-Cap Ad Stock - Oppenheimer Analyst Touts Amid Strong Financial Performance

Oppenheimer analyst Jason Helfstein maintained a Buy rating on Perion Network Ltd PERI and set a price target of $45.

PERI is now Helfstein's favorite small-cap digital advertising stock, with shares -28% over the past six months vs. peers' flat and NASDAQ's +10%, despite outperforming on every financial metric last year. 

PERI's Y/Y revenue growth outpaced peers by ~400bps in FY21 and ~1,400bps in FY22. Opco and Street estimates imply ~700bps of outperformance in FY23E, driven by PERI's mix of managed service DSP, search, CTV, and retail media capabilities.

PERI's search revenue has outpaced peers by an average of ~2,400bps since 1Q22. 

Similarly, PERI's advertising revenue (ex-search) outgrew the digital ad industry ex-China by an average of ~2,100bps in FY21 - FY22. Meanwhile, CTV/retail media, the fastest-growing segments of digital advertising, represent a combined ~10% of 2Q revenue, up from 7% in 2Q22.

PERI expanded EBITDA margin by ~600bps in FY22 vs. peers contracting ~300bps, and FY23E estimates imply an expansion of ~200bps Y/Y vs. peers contracting ~700bps. 

With revenue outperformance, EBITDA growth exceeded peers by ~8,300bps in FY22, and estimates indicate PERI will grow FY23E EBITDA ~4,200bps faster than peers.

Net cash is 27% of the market cap ($411 million cash as of 2Q) vs. peers at -1%. This has been driven by organic cash flow generation through prudent growth, allowing the company to pursue acquisitions and share buybacks.

PERI's stock -28% over the past six months vs. peers' flat & NASDAQ's +10% because the excitement around the Bing/ChatGPT partnership did not benefit search CPCs. Meanwhile, the stock has outperformed over the past two years, +45% vs. peers' -52% and NASDAQ's -8%. 

Helfstein projects Q3 revenue of $185.31 million and EPS of $0.64.

Price Action: PERI shares traded higher by 3.90% at $30.10 on the last check Friday.