Canaccord reiterates 'buy' rating on System1
Analysts at Canaccord Genuity left its forecasts on marketing outfit System1 unchanged after the release of the firm’s interim results on Friday.
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With System1 trading in line with its recent trading update, and with profit expectations well underpinned by tight cost control, along with investment in more scalable and lower cost products and services, the Canadian broker reiterated its ‘buy’ rating and 400p price target.
Canaccord said System1 revenues were set to “stabilise” in its next financial year, noting that it should then return to growth in 2020 as it responds to the redesign to its product offerings.
The broker also said System1’s key swing factor could be its ad ratings business, due to launch by the end of November.
“This is a differentiated subscription product designed to improve advertising efficiency (and save money) for agencies and advertisers. If successful, it could generate material incremental high margin/high visibility profits for SYS1,” said Canaccord.
The Canadian broker left its forecasts unchanged for the most part- flat revenues of £27m, and pre-tax profits of £3.4m, but did upgrade its EPS estimates from 17.9p to 19.4p to reflect lower tax rates. It also now assumes a flat dividend for FY19, given projected year-end net cash of £4.3m.