Mandalay Digital Group, Inc (NASDAQ:APPS)

STRONG INTERNATIONAL FOOTPRINT, SOFTWARE IS OPTIMIZED FOR OEMS OF MOBILE CARRIERS, STRONG CUSTOMER RETENTION, INFINITE TAM

Digtial Turbine (as the company is now called after a name change) has been hugely successful in recent years. Its stock price increased bij a factor of 15 (!) since 2019. So you might think that you have missed the boat. Currently trading at a Price/Sales value of 21, it appears that the stock indeed is not a real bargain. However, its performance is strong and a number of factors indicate that its past stock price appreciation may only the beginning an impressive journey.

Three reasons why Digital Turbine is well positioned for further growth:

1. The company has shown steady growth of about 35% in its financial years 2019 and 2020. And in 2021 (the year ending 30 March 2021) it is showing growth of 126%. This tremendous growth number is in part explained by a March 2020 acquisition. However, its Q1 year-on-year growth excluding this acquisition was 100%, making it clear that the company should not be seen as a ' growth by acquisition' story only.

2. Digital Turbine's industry is mobile advertising. It operates an independent mobile advertising platform that levels up the playing field for advertisers, publishers, operators and OEMs. Digital Turbine has shown to be hugely succesful in previous years, but doesn't appear to be taking this success for granted. Through a string of strategic acquisitions, one in 2020 and 3 in 2021, they are building a stronger proposition and are taking advantage of cross-selling opportunities. In early 2020 they aquired Mobile Posse, which boosted growth in their original business operations already in the same year. This should provide some assurance that they are capable of reaping very concrete benefits of their acquisions. In the first months of 2021 they announced three more Mobile Ad Tech acquisitions. Each of these businesses is profitable and is growing fast on their own. Additional growth opportunities will emerge after becoming part of the Digital Turbine group.

3. Digital Turbine's device management software is predominantly installed on Android devices. Its position on Android is strong and there still is ample room further growth. On IOS Digital Turbine's footprint is still small and it's a more difficult segment of the market to penetrate. But Digital Turbine's success on Android may trickle over and, together with its newly acquired partnering businesses, Digital Turbine may be well positioned for growth on IOS.

In the near future, Digital Trubine's share price may be held back as a result of some expected dilution of outstanding shares, as part of the acquisitions are paid for in shares. This should, however, not be a reason to postpone an investment in the company. Stock prices should be expected to rise if quarterly revenue growth continues to be as strong as it has been.