Israeli advertising agency Tremor International (LSE:TRMR) bills itself as a global leader in video advertising technologies. As ad budgets are often the first to be cut in an economic downturn, Tremor found the beginning of the pandemic a struggle, and its interim results for the first half of the year reflect this. However, its Q3 trading update shows signs of improvement. So, is now a good time to invest, or does it face challenges ahead?
Integrated business
Tremor heavily utilises technology to deliver its ads. The company was previously listed as Taptica International until it rebranded in June 2019. It has three core business divisions: Tremor Video, Unruly and RhythmOne. It bought Unruly from Rupert Murdoch’s News Corp at the beginning of the year and acquired RhythmOne in April 2019.
In January 2018, the Tremor share price peaked about £5 a share but has since been in decline. This past year has seen some share price volatility, and it’s now trading around £1.65. Tremor’s revenue for the first half of the year fell 5.8%, while its pre-tax losses increased by 790% from $3.3m to $29.4m.
Its interim results forecast is for Q3 EBITDA to be $11m and revenues to increase year-on-year. It’s reassuring for shareholders to read it’s returning to profitability. But with the pandemic raging on, I don’t think it’s a good time to buy the shares. Plus, Tremor’s price-to-earnings ratio is 39, which is high.
Potential lawsuits
In January 2018, US company AlmondNet asserted that RhythmOne’s online advertising system infringes 11 US Patents owned by the AlmondNet Group. A claim has never been filed and RhythmOne is now in a commercial agreement with AlmondNet’s affiliate, but the matter hasn’t been concluded. It could be a red flag that may affect Tremor’s future share price. Along with this, in June 2019, Uber Technologies filed a complaint in the US, against the firm when it was still known as Taptica, alleging fraud, negligence and unfair competition. The accusation dates back to 2014, but Tremor considers the claims to be without merit and is defending against them.
Personally, this stock is too risky for me and I’ve seen more enticing long-term investments elsewhere.
A rising share price
Mirriad Advertising (LSE:MIRI) is another AIM stock that recently reported its interim results. It uses its patented AI targeted ads to integrate seamlessly into the user experience. It’s had an exciting year, despite the pandemic, with revenue increasing by 109% to £897k, year-on-year. Over the past six-months Mirriad’s share price has risen 425%.
It recently launched on the OTC market in the US and is focusing on growing its revenues there. One area it’s particularly keen on is the music industry and aims to increase revenue through targeted advertising in music videos.
With China’s commercial activity bouncing back, things look to be continuing well there too. Mirriad’s already halfway through a two-year exclusive agreement with Tencent, one of the largest online video platforms in China. Its technology integrates with Tencent’s videos to distribute branded content to its large audiences.
I like what I see in this company and the rising Mirriad share price shows I’m not alone. I’m particularly impressed by its Tencent collaboration and think it could be a good time to buy shares in this ambitious business. However, as an AIM-listed company, it still comes with the risk of share price volatility and lack of liquidity.
