We came across a bullish thesis on Cardlytics, Inc. (CDLX) on Value Degen’s Substack by Unemployed Value Degen and Alejandro Yela. In this article, we will summarize the bulls’ thesis on CDLX. CDLX Technologies, Inc. share was trading at $3.39 as of Sept 23rd.
Cardlytics operates as an advertising platform integrated into many of the largest banking apps in the United States and the United Kingdom as it manages the bank card rewards programs, making it a market leader in this space due to its first-mover advantage. This strong market position gives them a strong foundation for future growth and a recent key partnership with American Express.
Recently CDLX upgraded their old platform after about 10 years only after feeling the backlash from the frustration of its clients, this upgrade was necessary to catch up with the industry standards to retain major clients. The newly developed technology for managing their advertisement platform is based on the AWS cloud which introduced the pay-per-click (PPC) functionality which helps advertisers to better monitor the advertising campaigns., which aligns CDLX with industry-standard practices in digital advertising. However, the rollout across the platform so far has only reached 10% of clients. It is expected that the platform will reach all the clients by the end of 2025 boosting ad revenue
The total Ad Spend in the overall market declined due to the interest rate hikes that took place, in the United States Ad Spend declined from $364.4 billion in 2022 to $364.2 billion in 2023. However, the revenue forecast for CDLX does not seem all pessimistic given that the upgraded platform will be available to clients as well for 2024 the US Ad Spend is projected to rise by 2.3% compared to 2022.
The major deal with American Express could boost revenue by 30%, but this impact is expected mostly in 2025 with Q4 2024 earnings showing signs of renewed growth. Going forward if CDLX continues to gain market share, improves its margins, and monetizes the large user base it has they have a huge potential for exponential revenue growth.
In the long-term, it is expected that with 30%-40% EBITDA margins and a P/E ratio of 15x-20x, CDLX could be a multi-billion-dollar company. Where one could see a 50x return over the next 10 years while in the next 6 months, a 5x return could materialize due to the imminent American Express catalyst. The only risks that we see going forward are the untested leadership and the potential share dilution.
Cardlytics, Inc. is also not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 19 hedge fund portfolios held CDLX at the end of the second quarter which was 24 in the previous quarter. While we acknowledge the risk and potential of CDLX as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CDLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: Analyst Sees a New $25 Billion “Opportunity” for NVIDIA and 10 Best of Breed Stocks to Buy For The Third Quarter of 2024 According to Bank of America.
Disclosure: None. This article was originally published at Insider Monkey.