Investors looking for a smart bet on internet advertising should take a closer look at shares of recently-listed Digital Media Solutions, Inc. (NYSE: DMS, MD-WT), which has a very strong business model and a compelling valuation. That’s according to IPO Edge Editor-in-Chief John Jannarone, who spoke to TD Ameritrade Network in a clip available here.
Jannarone, who previously wrote an analysis on DMS, explained that digital advertising is on fire, not just because of coronavirus, and DMS is an off-the-radar bet. He pointed out that DMS developed an edge several years ago by offering advertisers the ability to pay based on actual customer conversion rather than impressions – something that has led to an extremely high retention rate of 95%.
DMS has seen revenue grow at an annualized 25% organically over the last three years and it also has an opportunity to expand via acquisitions. The company has executed 11 M&A transactions since 2016 and has a robust deal pipeline across sectors.
Perhaps best of all, the stock has traded softly, creating a chance for savvy investors to get a great price. DMS trades at just 2x 2020 sales and 12.7 times 2020 Ebitda, a steep discount to peers.
Jannarone also suggested investors consider shares of Canoo, an electric vehicle company going public through a deal with Hennessy Capital Acquisition Corp. IV (NASDAQ: HCAC, HCACW). Canoo, which Jannarone also covered in a recent analysis piece, stands apart from other EV companies for several reasons.
One is that the company’s vehicles are ideally suited for “last mile” delivery, which has become very important to Walmart Inc., Target Corporation, and many other retailers. Winning a big contract with such a company would be transformational for Canoo and its shareholders.
The Canoo model, which consists of a “skateboard” that can accommodate “top hats” is highly flexible and keeps R&D spending manageable. Canoo is led by by Ulrich Kranz, who spent over 30 years at BMW and has the ideal background to grow the business.
Canoo trades at 0.85x 2025 revenue, much lower than public comps, according to Sentieo, an AI-enabled research platform.