Perion Network Stock is a Digital Monetization Play

Digital advertising platform Perion Networks NASDAQ: PERI stock exploded to the upside on its Q3 2021 earnings results showing double-digit top-line growth and raised guidance. The ad tech company is monetizing digital and connected TV (CTV) advertising and continuing to expand its network as evidenced by the completion of the Vidazoo video content platform on Oct. 4, 2021. The Company monetizes both the supply side composed of publishers and content creators and the demand side comprised of advertisers. Perion Network is at the hub where supply and demand meet at the center. The Company is benefitting post-pandemic from the growth in social media advertising spend during the reopening as well as the explosion in first and third-party content. Prudent investors seeking exposure in a rising ad tech player can watch for opportunistic pullbacks in shares of Perion Network.

Q3 FY 2021 Earnings Release

On Oct. 4, 2021, Perion released its fiscal third-quarter 2021 results for the quarter ending September 2021. The Company reported non-GAAP diluted earnings-per-share (EPS) profits of $0.40 nearly doubling EPS from the year-ago same period. Revenues rose 45.1% year-over-year (YoY) to $121.02 million. Growth was led by Display Advertising revenues up 82% YoY comprised of 245% growth in video and CTV and a 30% increase in average revenues per client and 12% rise in total clients. EBITDA margin was 37%. The Company raised upside guidance for FY 2021 to $430 million to $445 million revenues and EBITDA to $52 million to $53 million. Fiscal full-year 2022 revenues were raised to $545 million to $575 million versus $500.88 million consensus analyst estimates with EBITDA coming in between $68 million to $72 million.

CEO Comments

Perion CEO Doron Gerstel commented, “During the first nine months of the year our display advertising generated more than $165 million of revenues, exceeding the $149 million generated for all of 2020. Driven by the capabilities of our iHub to create unprecedented advertising efficiencies, our average deal size expanded by 30%, as budgets moved to our breakthrough high-impact, creatively led formats especially for Video and CTV. In recognition of the growing demand for video advertising, we made the accretive acquisition of Vidazoo, a leading video tech platform. By combining Perion’s proven, high-impact video suite and Vidazoo’s unique online video player, we can offer a proprietary, end-to-end video solution that extends the efficiency of our iHub, and that meets the needs of publishers for simple, highly scalable, plug-and-play video solutions.” He continued, “Perion is firing on all cylinders. Our diversified revenue streams coming from both sides of the open web and the synergies derived from our ability to connect all of our operating assets to a central iHub increased our confidence in over-delivering on our commitment to become an Ad Tech unique market leader. As a result, we have increased our 2021 and 2022 guidance.”

Conference Call Takeaways

CEO Gerstel set the tone, “There is a very interesting trend that we've noticed. And that has to do with the type of format of digital advertising. And in this case, we've seen that the advertiser are shifting towards what we call high impact formats, I will talk more about it and actually going to show you some of the great high impact advertising, which has a different level of creativity, different level of engagement, interaction with the users, with the consumers, which advertising like and be able to see a way-way higher return on ad spend. So that's definitely a very interesting trend that we notice.”

Growth Drivers

CEO Gerstel elaborated on growth drivers, “Let's go and dive in into some of the growth drivers that I mentioned. From all the statistics that we're able to get from the different sources, I pick this one which excites me very much and has to do with the average time spent per day in digital video by the device even that's from April 2020, but the numbers have not changed. It's just growing. And as far as we've seen just before the call, it's close to two hours, two hours that the consumer spends per day on video content. And that's the main trigger. The first trigger is for the advertiser. And we like to say they chase the consumer. And if the consumer spends more time on video, no matter what screen, they follow this trend, and they invest more in all kinds of video advertising. And as a result, we are growing our business and we're growing as you can see exponentially our advertising, which has to do with video and CTV. From a year-over-year perspective, we almost tripled the revenue between the first nine months of 2020 to the first nine months of 2021 to $32.8 million.”

The Intelligence Hub

CEO Gerstel concluded, “Moving on into it. As far as the intelligent hub. So how do all pieces come together? And we added Vidazoo into our chart into the hub and spoke model than that, on one hand, we have the set of suppliers that on the other hand, sorry, demand asset. On the other hand, we have the supply asset, but what is more important is the intelligent hub that everything goes into this hub. And this hub is being evaluated based on three factors. The ability to create value by reducing operational costs and I mentioned it because we have commonly shared assets that we're doing among the other shared services that we're doing among the different assets. So, this is already showing its fruit right now and when I talked about our ability to leverage our expenses this is one. Reduce stack because we are closing the loop. But more important is how we increase customer value. And everything that we did in SORT, has to do with the fact that we are sitting here on a goldmine that able to get their indicator from so many customers that going through our hub consumer that providing this very important engagement indicator that allows us to develop this type of AI-driven sort technology that will improve over time. So our machines are working 24/7 in order to make it just better and better.”

PERI Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision view of the price playing field for PERI shares. The weekly rifle chart peaked near the $30.45 Fibonacci (fib) level on the Q3 2021 earnings gap. Shares have retraced back down but are still above the weekly upper Bollinger Bands (BBs) at $25.75 as the weekly 5-period moving average (MA) support continues to catch up at $21.97. The weekly pup breakout was very powerful and looks to expand the trading range. The daily rifle chart uptrend 5-period MA support is rising at $26.70 with upper daily BBs at $29.90. The daily formed a market structure low (MSL) buy trigger on the $22.17 breakout. Shares have retraced back to the daily 5-period MA as the stochastic attempts to cross up. Prudent investors can watch for opportunistic pullback levels at the $26.86 fib, $26.01 fib, $24.62, $22.22 fib, and the $20.66 fib level. Upside trajectories range from the $32.42 fib up to the $42.59 price level.