Acuity Ads: A Small-Cap Stock With Massive Upside Potential

Acuity Ads is a top Canadian growth stock that might gain over 80% in market value over the next 12 months.

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AcuityAds (TSX:AT)(NASDAQ:ATY) is one of the most popular growth stocks on the TSX. The high-quality tech stock offers a proprietary machine learning platform to help advertisers improve their campaigns and thereby boost their top-line growth in the process. Acuity Ads is a small-cap stock with a market cap of $684 million, making it a high-risk high-return investment. Let’s take a look at what makes it a solid long-term investment for growth investors.

Solid growth potential for Acuity Ads

AcuityAds is an intriguing ad-tech stock due to its interesting business model. The company works closely with the advertisers and marketers and lets them improve their campaigns while enabling them to reach a bigger target audience. Its platform has an easy-to-use interface that allows the clients to select their programmatic advertising, thereby, offering them unique capabilities.

Further, the AcuityAds platform also offers real-time data analytics and insights to advertisers to help them make better-informed business decisions.

The best way to capture a large market is either by following a cost leadership strategy or by differentiating the products from others in the same industry. While cost leadership is all about providing quality products at the least possible price, differentiation is about providing a revolutionary product that is of superior quality with improved features compared to others available in the industry. AcuityAds seems to be meticulously following the latter strategy and is thus gradually moving toward capturing a bigger market.

The company’s Illumin advertising automation technology is one of a kind and is all set to revolutionize the landscape of programmatic advertising. Since launching in October 2020, the platform has gained immense popularity within a short span of time due to its eccentric nature. As a result, plenty of brands are coming forward to use it. The company believes people are choosing its platform over others because of the better creative insights, higher work efficiency, improved audience reach, and automation facility its platform offers.

Improved financial performance

Like many other businesses around the world, AcquityAds had a sloppy 2020 because of the ongoing pandemic and its revenues had declined by 12% last year compared to 2019. But the company’s financials experienced a quick rebound by the end of Q1 of 2021 as it recorded an adjusted EBITDA of $3.6 million that was 152% higher than the prior-year period. Additionally, last month AcuityAds claimed it ended its second quarter with a 135% improvement in client base compared to its last quarter. Moreover, revenues for the quarter were also 60% higher year over year.

The aforementioned points indicate AcuityAds is one of the top Canadian tech stocks to buy now and hold for the long term. Investors looking for a perfect growth stock with huge potential can add this one to their portfolios. Moreover, the stock is still trading at a discount of 80% to the 12-month consensus price target estimates, which makes this the perfect time to invest and get access to potentially huge future gains.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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