Digital Turbine Inks Deal To Buy AdColony; Shares Gain 4%

Digital Turbine announced the acquisition of AdColony, a leading mobile advertising platform provider, from its parent, Norwegian internet company, Otello Corporation ASA. Shares of Digital Turbine were up about 4% in the pre-market session on Monday after closing 14.1% higher on Friday.

Digital Turbine (APPS) estimates the total transaction value to be between $350 million and $375 million. The consideration involves cash and earn-out payments.

Per the terms of the deal, $100 million is required to be payable upon acquisition completion and another $100 million after six months of the transactions closure. The remaining $150-$175 million will be paid as earn-outs based on AdColony achieving certain future net revenue targets during full-year 2021. (See Digital Turbine stock analysis on TipRanks)

Digital Turbine intends to fund the buyout through a combination of available cash on hand and borrowings under the current senior credit facility.

On Feb. 4, B.Riley Financial analyst Sameet Sinha raised the stock’s price target to $85 (3% upside potential) from $77 following the company’s better-than-expected 3Q results. The analyst also reiterated his Buy rating on the stock.

In a note to investors, Sinha wrote, “We are raising our estimates across the board on the upside in the quarter, as well as an expectation that operating momentum can continue from here. Our $85 PT equates to a C2022 EV/revenue multiple of 17.4x, which we see as reasonable, given our view that APPS can grow revenue, EBITDA and FCF at a 30%+ CAGR over at least the next three years.”

Consensus among analysts is a Strong Buy based on 5 Buys versus 1 Hold. The average analyst price target stands at $84.17 and implies marginal upside potential of around 2% to current levels. Shares have skyrocketed over 1200% over the past year.

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