Veritone: Roth Slashes Very Generous Target to a Little Less Generous
By
Tiernan Ray
Feb. 20, 2018 1:47 p.m. ET
Shares of artificial intelligence pioneers Veritone (VERI) are down 15 cents, or 1%, at $14.57, after Darren Aftahi with Roth Capital slashed his price target to $32 from $62 on the stock, in advance of its report on February 26th, after market close.
Aftahi maintains a Buy rating, but he writes that this year, he is taking a more “conservative” approach to valuation.
As Aftahi explains the stock multiple he’s assigned,
VERI shares currently trade at ~5x our above consensus FY18 revenue estimate of ~$37M (vs. consensus estimates of ~$31M) […] With the lack of pure-play AI companies, we utilize a baseline of publically traded (global and domestic) competitors, resulting in a comparable mean of ~14x, although including companies with globally generated revenue. We believe a fair valuation for VERI thus should be at ~12x FY18 sales, in-line with the multiple we’ve applied to publically traded AI comp MARK’s KanKan entity and ~140% premium to the market multiple. We are taking a more conservative approach going into FY18, utilizing our same ~$37M FY18 sales estimate and ~12x EV/’18E sales multiple, we arrive at our $32 PT, down from $62 prior.
As for Monday’s report, Aftahi expects Veritone to top expectations for Q4, more than doubling its revenue, year over year, turning in perhaps $5.2 million in revenue and a 47-cent loss per share, which would be better than the $4.4 million and negative 52 cents the Street is modeling.
"We believe strength in the Q will be driven by the ~200 iHeartRadio stations onboarding as well as other new broadcast customers for aiWARE,” writes Aftahi.
Aftahi expects the company to “continue to be aggressive” in adding to its portfolio via acquisitions, and is awaiting some “further insight” on that score on the call.
