Pareto issued a bullish report today on Linkfire, one of the most interesting IPOs of the last year.
The company is growing strongly and today it reported EBITDA break-even from the next year. Small volume retail selling caused the share price drop and made it even more interesting investment proposition.
Pareto Securities report on Linkfire today
Linkfire expects to reach EBITDA break even in 2023
Linkfire announced today that it expects to reach EBITDA break even in 2023. The news come following that operations are performing well
and as several product optimization measures have been taken that are helping improve the monetization level on traffic. The projection
does not entail any changes to Linkfire’s previously disclosed financial targets of 50-70% organic revenue growth for the 2021-2023 period,
with a targeted gross margin of ~80%. We have targeted EBITDA break even in 2023 since we initiated coverage but view it as positive
seeing that the management come out and state it as a projection. This reaffirms our thesis that the high gross margin structure in Linkfire
will allow for significant profitability in the years beyond 2023, as the company reaches greater revenue levels and matures as a company.
We have a Buy rating on Linkfire, with a target price of SEK 16.
Five bullet point summary on Linkfire opportunity:
- Linkfire connects consumers on social platforms who wanted to download a song to music streaming companies that provide the content. Linkfire collects revenues from both.
- Linkfire has 70% market share in its segment. The penetration is still very low.
- Linkfire revenues have grown at 40%-60% CAGR with a stable 76% gross margin. The growth is accelerating further in 2022.
- Linkfire managed to dominate music industry. They will now enter with the same product podcasts, movies and games. These new areas will multiply the revenue opportunity.
- Very strong catalysts in the next six months.
See the previous blog posts on Linkfire for more details
Link to the Q3 presentation
Link to the investment thesis
Disclosure:
The goal of the blog is to provide investment ideas for further research. I/we have a beneficial position in the shares discussed above either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. The article does not represent investment advice. Please do your own research before making any investment action.
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