Goldman Sachs analyst Eric Sheridan initiated coverage on MediaAlpha, Inc. (NYSE:MAX) with a Buy rating and a price target of $20.
The analyst writes that MediaAlpha benefits from long-term growth trends in insurance digital advertising, including the P&C market recovery, the shift to direct-to-consumer models, and the increasing use of digital channels by consumers and advertisers.
In the current market, key factors driving volatility include the health of the P&C insurance market, particularly autos, and the pace of insurance carrier ad spend recovery, adds the analyst.
Sheridan says that MediaAlpha’s addressable market opportunities are substantial and expanding, particularly in the growing U.S. digital advertising market, with a focus on the insurance sector, which is expected to accelerate in the coming years.
The analyst anticipates MAX’s revenue growth to compound at 20%+, primarily driven by the P&C insurance industry’s recovery and long-term secular trends.
Additionally, the analyst projects cost leverage and margin expansion, with modest yet steady growth due to scaling revenues against a relatively fixed cost base.
Sheridan forecasts that adjusted EBITDA as a percentage of contribution profit will increase steadily from around 7.0% in 2023 to about 9.5% in 2025 and 11.0% by 2029 as management continues to exercise discipline in controlling operating expense growth.
Recently, MediaAlpha reported second-quarter GAAP EPS of $0.07, exceeding the $0.03 loss estimate, while sales of $178.274 million surpassed the $151.419 million estimate.
Price Action: MAX shares are down 0.74% at $16.77 at the last check Tuesday.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Image via Unsplash/ Headway
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