First Berlin – ad pepper media International N.V. Research Update (14/01/2022)

First Berlin Equity Research has published a research update on ad pepper media International N.V. (ISIN: NL0000238145). Analyst Dr. Karsten von Blumenthal reiterated his BUY rating and decreased the price target from EUR 8.10 to EUR 7.10.

Abstract
ad pepper has lowered Q4 guidance due to weaker than expected performance of the ad pepper media and Webgains segments. The group is now guiding for Q4 revenue of €7m (previous guidance: €8m) and Q4 EBITDA in the range of €0.6m - €0.8m (no previous guidance, Q4/20: €2.2m). For 2021, ad pepper is guiding for €27.4m in revenue (2020: €25.6m, +7% y/y) and EBITDA in the range of €4.2m - €4.4m (2020: €6.6m, -33% to -36% y/y). Q4 is usually the strongest quarter of the year due to the Christmas business when digital advertising reaches its annual peak, especially in the Webgains segment. But the dependence on the Christmas business also lowers visibility as Q4 revenue hinges on clients' digital ad spending in the five weeks before Christmas, especially the days around Black Friday and Cyber Monday. The shopping behaviour and thus the digital ad spending in this short period are difficult to predict. The previous Q4 guidance was given on 19 October 2021 and has now had to be adjusted. Despite this setback, we believe that the fundamental drivers (increasing share of online shopping & digital advertising) are intact. However, in Q4/21, the pandemic effect, which was very strong in Q4/20 due to severe lockdowns, was overall lower than expected. In 2021, ad pepper invested in personnel and regional expansion. This burdens margins, but lays the foundations for further growth. Given the weaker 2021 figures, we have lowered our forecasts for 2022 and the following years. Based on ad pepper's 2021 guidance, we now assume that the top line will grow by 10% and EBITDA by 28% y/y in 2022. An updated DCF model yields a new price target of €7.10 (previously: €8.10). We confirm our Buy recommendation.