Digital Turbine Stock: Undervalued Tech Stock Down 75% but Could More Than Triple

Digital Turbine Inc Reports High Revenue & Earnings Growth

Digital Turbine Inc (NASDAQ:APPS) is a great tech stock I’ve been bullish on for years. When I first wrote about APPS stock in early 2019, it was trading at $3.20.

APPS stock was one of the tech darlings during the COVID-19 pandemic, advancing 684% in 2020. From March 2019 to February 2021, Digital Turbine stock surged by about 3,100% to a record high of $102.56.

That momentum came to an end in early 2021 after the Federal Reserve hinted it might have to start raising its benchmark lending rate. Things have gotten worse since then. The tech-heavy Nasdaq has been firmly entrenched in a bear market for a while now.

Most tech companies don’t actually make money, and rising interest rates make it more expensive for them to borrow capital. That hasn’t been a problem for Digital Turbine Inc, though. The company has continued to report outstanding financial results, including top-line and bottom-line growth.

Moreover, the company doesn’t really have supply chain issues, so it’s largely insulated from inflationary pressures.

That doesn’t mean Digital Turbine Inc hasn’t been facing the same kind of macroeconomic headwinds as the rest of the digital ad market, including recessionary fears. Nevertheless, the company has still reported profitable growth, made headway on several strategic initiatives, and provided solid guidance for the second quarter.

In spite of all the good things going on at the company, Digital Turbine stock has been taking a beating. As of this writing, APPS stock is down by 75% year-to-date and 78% year-over-year. On the plus side, shares of Digital Turbine Inc have been trading near a support level of $14.50.

Despite all the economic uncertainty and stock market volatility, Wall Street is bullish on Digital Turbine stock. Analysts have provided a 12-month share price target in the range of $41.50 to $60.00, which points to potential gains in the range of 173% to 295%.

APPS Stock Overview

Digital Turbine Inc operates the leading mobile growth platform for advertisers, publishers, carriers, and device original equipment manufacturers (OEMs). It essentially helps businesses make their apps more discoverable and allows them to monetize their mobile content. (Source: “Investor Day,” Digital Turbine Inc, November 11, 2021.)

Digital Turbine Inc also provides an end-to-end platform that delivers advertising to consumers on mobile devices and a platform that allows mobile application developers and digital publishers to monetize their content through display, native, and video advertising.

To date, Digital Turbine’s products have been adopted by more than 40 mobile operators and OEMs worldwide. The company has 45,000 publisher partnerships, more than 500 advertiser relationships and a monthly reach of 1.5 billion.

Strong Fiscal 2023 First-Quarter Results

For the first quarter of fiscal 2023 (ended June 30, 2022), Digital Turbine announced that its revenues increased by 19% year-over-year to $188.6 million. (Source: “Digital Turbine Reports Fiscal 2023 First Quarter Financial Results,” Digital Turbine Inc, August 8, 2022.)

The company’s first-quarter net income climbed by five percent year-over-year to $15.0 million, or $0.15 per share. Its adjusted net income increased by 15.5% year-over-year to $38.6 million, or $0.38 per share.

Digital Turbine Inc’s first-quarter adjusted earnings before income, taxes, depreciation, and amortization (EBITDA) increased by 30% to $51.9 million. The company’s free cash flow (FCF) in the first quarter grew by 120% year-over-year to $31.5 million.

The company ended the first quarter of fiscal 2023 with $89.3 million in cash. Moreover, it paid down $60.5 million in debt using FCF from its operations.

For the second quarter of fiscal 2023, Digital Turbine Inc expects to report revenues in the range of $170.0 to $180.0 million, adjusted EBITDA in the range of $46.0 to $50.0 million, and adjusted earnings per share (EPS) in the range of $0.32 to $0.34.

Analyst Take

Stocks need a reason to go up or down, and right now, macroeconomic headwinds are dragging stocks lower, even the shares of excellent tech companies like Digital Turbine Inc.

Eventually, the economy will turn around and investors will focus on fundamentals again. That bodes well for Digital Turbine stock.

Digital Turbine Inc is focused on maintaining its highly profitable business model while making investments in a wide range of growth initiatives, including strategic partnerships with other app distribution platform providers.