ironSource Ltd.

IS Details

ironSource Ltd. (NYSE: IS) is an Israel based leading provider of a software platform that helps mobile content providers to succeed in the App ecosystem. It assists app developers in transforming their apps into successful, scalable businesses using the company's platform. The business went public on June 28, 2021, following a special purpose acquisition company (SPAC) merger with Thoma Bravo Advantage, a blank cheque company, and began trading on the exchange on June 29, 2021.

Expansion of Services: IS announced the extension of its Ad Quality solution on September 09, 2021. The enhancements are expected to enable developers to choose the ads shown on their apps and maintain their brand's integrity while also improving the user experience on their app and, as a result, maximizing monetization.

Further, IS also announced the launch of two significant products to help app developers in the new iOS era on September 09, 2021: Universal SKAN Reporting (SKAdNetwork) and CV Manager (Conversion Value). These new products will help developers better understand user value and its anticipated lifetime value (LTV), which aids in the optimization of user acquisition (UA) campaigns.

H1FY21 Results: The company reported a sharp uptick of 88.47% in revenues to USD 254.75 million during H1FY21 (ended June 30, 2021) compared to USD 135.16 million during H1FY20, driven by revenue from app developers and telecom operators. However, IS witnessed a decline in net income to USD 20.25 million during H1FY21 vs. USD 46.39 million during H1FY20. As of June 30, 2021, its cash and cash equivalents amounted to USD 706.80 million, with no outstanding debt.

Key Risks: The company operates in an industry characterized by rapid technology advancements, new features, tools, solutions, and strategies. Therefore, its ability to create and grow its solutions to respond to market changes swiftly and effectively will be essential to its future success. Furthermore, as of March 31, 2021, the business relies on 292 clients that generate annual sales of more than USD 100,000, collectively accounting for 94% of total income. Therefore, any failure to retain or develop these existing partnerships might negatively impact the company's bottom line.

Outlook: In its Q2FY21 investor presentation, IS stated that its Q3FY21 revenue is expected to range between USD 125 million and USD 130 million, with adjusted EBITDA of around USD 43 million to USD 45 million. The FY21 revenue estimates are USD 510 million to USD 520 million, with adjusted EBITDA ranging from USD 173 million to USD 178 million.

Valuation Methodology: Price/Sales per share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

IS Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: IS' share price surged by 28.31% in the past month and is currently trading at the higher band of the 52-week range of USD 7.80 to USD 13.19. The stock is currently trading far above its 50 DMA level, and its RSI Index is at 73.66. We have valued the stock using the Price/Sales-based relative valuation methodology and arrived at a target price of USD 11.00. Considering the significant uptick in the stock price in a short duration and other technical indicators, we believe the company's business fundamentals are sufficiently reflected at its current trading levels. Hence, we recommend a "Sell" rating on the stock at the current price of USD 12.43, up 10.59% as of September 14, 2021, 11:24 AM ET.

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.  

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