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 6.80 to EUR 6.20.

Abstract
ad pepper media (APM) has reported preliminary Q1 figures which were below our forecasts and well below the prior year numbers. Revenue was down 15% y/y and 11% lower than our forecast at €5.9m. EBITDA was only slightly positive versus €1.3m in Q1/21 and FBe of €0.8m. While the ad agents segment showed solid 9% growth, Webgains segment sales declined 17% and ad pepper media segment sales slumped 42%. Restrained campaign bookings from customers due to supply chain issues as well as subdued e-commerce activities, particularly in the UK, which is the domestic market for Webgains, weighed on the revenue development of the two latter segments. All three operating segments reported positive EBITDA, which was almost completely consumed by the admin segment, which entails the holding costs. For Q2, management is guiding for revenue of €6.3m – €6.5m, which would be up to 3% below the Q2/21 figure. Given the weaker than expected Q1 figures and the subdued Q2 guidance, we lower our 2022E forecast and now expect only 4% sales growth, and EBITDA slightly below the prior year level. An updated DCF model, which takes the lowered forecasts and the higher interest rate level into account, yields a new price target of €6.20 (previously: €6.80). We stick to our Buy rating, as we expect ad pepper to largely maintain its profitability, the very strong balance sheet (large net cash position) and to generate positive free cash flow. APM is well-positioned as an online performance marketing pure play in a structural growth sector, but the company is not immune to macroeconomic headwinds such as high inflation, subdued growth, falling consumer confidence and customers’ supply chain disruptions.