APPS Stock: Should you invest in Digital Turbine ahead of next week’s earnings?

For Digital Turbine, Inc. (NASDAQ: APPS), 2020 was a game-changing year, marked by accelerating organic growth and solid cash generation. After languishing in the single-digit territory for more than a decade, the mobile advertising platform’s stock entered an upward trajectory early last year and has maintained the momentum since then.

Stock Peaks

A few months ago, the stock hit a record high of $94.74, before entering a volatile phase. Interestingly, APPS is considered to be undervalued despite the strong gains. If experts’ bullish outlook is any indication, the current slowdown is temporary and the stock is on its way to breach the $100-mark in the next twelve months. So, it is a good idea to buy it before that.

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Read management/analysts’ comments on quarterly reports

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The Texas-based mobile communication solutions provider is dependent on the proliferation of smartphones and other handheld communication devices that connect to the internet via wireless networks. The company has been resilient to the pandemic so far and is well-positioned to take advantage of the ongoing adoption of cellular phones and tablet computers, a trend that is expected to pick up further momentum in the coming years.

We do not anticipate the secular tailwinds of device sales and on-device media and content consumption to slow down for our business. We’re very optimistic that the reopening of the economy benefits Digital Turbine in a material way as more devices are sold and more advertisers try to reach consumers recognizing consumer eyeballs are in the applications and content, which is where the advertisers also need to be.

Bill Stone, chief executive officer of Digital Turbine

Risk to Growth

The volatile regulatory environment in the industry where it operates is the main challenge facing the company in terms of meeting its growth targets. The constantly changing data protection regulations for mobile communication service providers and shifting customer interests call for a high level of innovation that requires continued investment.   

As part of its efforts to stay on the growth path, the company recently made a series of acquisitions, including Triapodi Ltd, AdColony Holding, and Fyber. On completion of the integration, the newly-added assets should become accretive to earnings immediately.

Bullish View

The company is all set to release its first-quarter results on August 9 amid expectations for a two-fold increase in earnings to $0.31 per share on revenues of about $190 million, which is sharply higher than in the prior-year period. In the fourth quarter, revenues more than doubled to $95 million, exceeding the market’s prediction. There was a five-fold increase in adjusted earnings, which came in at $0.25 per share. Net income more than doubled to $30 million.

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Key highlights from Alibaba’s Q1 2022 earnings results

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The performance of Digital Turbine’s stock has not been very impressive in the past few months though it stayed above the long-term average consistently. The shares traded lower during Tuesday’s regular session, after losing around 11% in the past 30 days.