APPS Target Price
Without knowing, I realized I had written over 6 articles on Digital Turbine aka APPS. I could probably write another post on "20 points of APPS".
But for this post, I want to try something different. I want to try to find out the "Target Price" (TP) for APPS.
The reason for doing this is that the share price of APPS has been going on a strong uptrend since 31 Aug 21. It is a bit too fast too furious for my liking, for which I am getting uncomfortable with APPS being my 2nd biggest holding in my portfolio.
However, before I start, I like to define what I mean by TP. Ignore what everyone else say.
IMO, it is a subjective figure, a self-fulfilling prophecy, a figure that makes an investor feel better when we are bag-holding, and it should be as high as possible, till the point where we think this is ridiculous and you will want to sell.
With that, I will be having 2 approaches towards calculating the TP:
- Comparison against its peers using the average PS, PE, PC, EV/EBITDA ratios - The peers are IronSource (CEO once mentioned this company as a close rival), Roku (CEO talked about this company in the last 2 transcript) and The Trade Desk (The largest ad-tech other than Google and FB).
- My personal approach to PS ratio, My PS Growth Valuation Method - I made a over 30 mins Youtube video before, stating that I believe PS ratio and sales growth rate relatively move in the same direction. But one should have assume the ratios by considering the market and the peers.
Furthermore, I will actually calculated the TP per year for the next 2 to 3 years.
- This differentiate from the normal way of doing TP. Normally when doing a DCF valuation, people used a 5 to 10 years outlook - meaning if the share price move too fast and reach a price that is based on a 5 to 10 years outlook, it definitely meant that we should sell.
- However, IMO, a 5 to 10 years timeline is too far ahead. Too many things could change. I prefer using a shorter timeline such as 2 to 3 years as we can better predict the revenue figure.
- Do note that the financial year end for APPS is as of March, but results out only in June. Thus, when I stated Mar-22, meaning the end of the financial with results out during Jun-22.
|Information taken from Finviz and Morningstar|
|All Figures are TTM except for EBITDA|
With information from Finviz and Morningstar, I calculated the average ratio for each of the category (including APPS), and then, calculated the expected share price per average ratio based on the TTM financial figures. Finally, I took the average of all the expected share price and came up with US$90.880.
This share price is what I deem as the "Current TP". The idea is that "if my peer can have that kind of ratios, why I cannot have as well?".
|Screenshot of the calculation|