Digital Turbine undervalued BofA says, as firm starts coverage
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Digital Turbine (NASDAQ:APPS) shares rose nearly 5% on Monday as Bank of America started coverage on the mobile growth software company, noting it is "undervalued" at current levels.
Analyst Omar Dessouky started coverage on Digital Turbine (APPS) with a buy rating and a $24 price target, noting that the company has exclusive contracts with more than 40 mobile carriers and original equipment manufacturers to help them generate incremental revenue by monetizing time spent on device and carrier homepages.
"Even assuming no growth in the [App Growth Platform] business, the current implied [2024 enterprise value-to-EBITDA] ratio of 7x appears low in our view for a business still expected to grow at ~20% a year," Dessouky wrote, noting that at an enterprise value of $3 per active device, Digital Turbine's (APPS) on-device solutions is undervalued when compared to Meta Platforms (META) and Snap (SNAP).
By focusing on a niche market, Digital Turbine (APPS) has more than 70% on U.S. Android devices, which Dessouky added "should support barriers to entry for the foreseeable future." 
The analyst also pointed out that competitors such as ironSource's (IS) Aura product contributes only 10% of revenue and in second place compared to between 30% and 40% for Digital Turbine (APPS) Array product.
"We forecast a 25% on-device revenue [compound annual growth rate] through (calendar year 2025), driven by an 11% Ignite device installed base [compound annual growth rate] and 14% [compound annual growth rate] in [average] revenue per device," Dessouky explained. 
"We think that new carriers and [original equipment manufacturers] would gravitate to either Digital Turbine or ironSource as we donât foresee clear incentives to take the risk of onboarding an unestablished vendor for only an incremental revenue opportunity." 
Earlier this month, Digital Turbine (APPS) announced a strategic investment in Aptoide, one of the largest independent Android app stores, with more than 250 million users.