Perion Pops 14% Pre-Market On Lifted Sales Outlook; Street Sees 35% Upside

Shares of Perion Network spiked 14% in Monday’s pre-market session after the tech company raised its fourth-quarter sales guidance above the Street’s expectations, driven by online advertising growth and strong video demand.

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Specifically, Perion (PERI) now expects revenues in the fourth quarter to be between $100 million-$105 million, up from the previous guidance of $81 million-$91 million. Analysts had been looking for $86.14 million. Adjusted EBITDA is forecasted to land between $8-$10 per share, compared to the $13-$14 per share previously expected.

For the full year, Perion now projects sales of between $310 million-$315 million, exceeding the Street consensus of $295.95 million. Adjusted EBITDA is estimated at $30-$31 per share in 2020.

The upbeat financial outlook comes after Perion this year snapped up the assets of digital publishing company Pub Ocean and bought ContentIQ to boost incremental revenue opportunities and enhanced profitability. Last month, the company announced the renewal of a multi-year strategic partnership with Microsoft (MSFT) to fuel search advertising business growth through its search technology division, CodeFuel.

“The acceleration of Perion’s advertising revenue growth is being driven by higher-than-expected revenue synergies from recent acquisitions, as well as higher demand across our CTV and video offerings,” commented Doron Gerstel, Perion’s CEO. “Additionally, following the four-year renewal of our partnership with Microsoft, announced earlier this quarter, we see an increased number of publishers who wish to engage with Perion’s search business unit.”

Looking ahead, Gerstel said he expected Perion to post double digit revenue growth rates over the coming years.

In reaction to PERI’s deal with Microsoft, Oppenheimer analyst Jason Helfstein last month assigned a Buy rating on the stock with a $10 price target (29% upside potential), saying that the partnership solidifies the company’s search revenue stream, as the focus now turns toward growing its performance-based advertising segment.

Helfstein expects the deal to continue to account for a large portion of the company’s overall revenue mix. As of 2019, Microsoft accounted for 63% of PERI’s total revenue, the analyst noted.

“We expect the widely anticipated contract extension to drive growth in PERI’s search technology business, CodeFuel, as we believe the company was able to negotiate slightly improved contract terms through 2024,” he wrote in a note to investors. (See PERI stock analysis on TipRanks)

From the Street, Perion scores a Strong Buy analyst consensus, based on 4 unanimous Buy reviews. The stock’s average price target of $10.45 is slightly more bullish than Helfstein’s, suggesting 35% upside potential over the next 12 months. That’s with shares already up 24% so far this year.