Online engagement has increased significantly since the start of the COVID-19 pandemic period because people have been spending more time at home, working remotely. Internet penetration is at an all-time high. The International Telecommunication Union (ITU) reported solid global growth in internet usage. According to the organization, the estimated number of people who have used the internet surged to 4.9 billion in 2021.

Mobile phone usage has also increased. The total number of mobile phone subscriptions crossed eight billion for the first time in 2019 and reached 8.6 billion this year. This has heightened the prominence of mobile advertising, with companies devoting increasingly large budgets to it. Spending on mobile advertising rose 17% versus 2020 and is expected to surpass $339 billion by 2023.

Furthermore, the global mobile advertising market is expected to grow from $96.46 billion in 2021 to $782.12 billion in 2028, at a 34.8% CAGR. Given this backdrop, Wall Street analysts expect mobile advertising stocks Digital Turbine, Inc. (APPS) and Phunware, Inc. (PHUN) to rally by more than 50% in price in the near term.

Digital Turbine, Inc. (APPS)

APPS provides media and mobile communication products and solutions. The Austin, Tex.-based company markets its offerings to mobile operators, application advertisers, publishers, and device original equipment manufacturers. It also supplies programmatic advertising and targeted media delivery services.

On December 8, APPS and data-driven commerce platform Bango plc announced a strategic collaboration that enables app developers to provide end-users with more secure payment options. The multi-year global agreement is expected to be launched commercially in the first quarter of 2022 and is expected to deliver better user experiences and drive greater revenue opportunities.

On December 6, APPS announced the expansion of its strategic partnership with telecommunication service provider Telefónica SA (TEF) to cover the European and Latin American markets and add new products. The partnership should enhance APPS’ presence in international markets.

For its fiscal second quarter, ended September 30, APPS’ net revenues increased 337.6% year-over-year to $310.21 million. Its non-GAAP gross profit rose 212% from the prior-year quarter to $93.99 million. Its non-GAAP adjusted net income and non-GAAP adjusted net income per share came in at $45.28 million and $0.44, respectively, up 213.1% and 193.3% from the same period last year.

A $0.39 consensus EPS estimate for the next quarter (ending March 2022) indicates a 56% year-over-year improvement. And the $328.51 million consensus revenue estimate for the coming quarter reflects a 245.5% rise from the prior-year quarter.  APPS has an impressive surprise earnings history; it has topped consensus EPS estimates in each of the trailing four quarters.

The stock has gained 22.3% in price over the past year, 6.9% over the past five days to close Friday’s trading session at $53.25.

All the five Wall Street analysts rating APPS have rated it Buy. The 12-month median price target of $108.80 indicates a 104.3% potential upside. The price targets range from a low of $80.00 to a high of $132.00.

Phunware, Inc. (PHUN)

PHUN is an integrated software platform provider that enables companies worldwide to engage, manage, and monetize their mobile application portfolios. Its services include cloud-based mobile software licenses in software development kits (SDKs) and used in mobile applications. PHUN is based in Austin, Tex.

On December 9, PHUN announced the purchase of an additional 100 bitcoin, which takes the company’s total bitcoin aggregate to approximately 630 as of the announcement date. The purchase should increase the company’s digital assets.

On November 23, the company announced that its Multiscreen-as-a-Service (MaaS) platform would be made immediately available in Amazon.com, Inc. (AMZN) Web Services Marketplace. Regarding this offering, Randall Crowder, Chief Operating Officer at PHUN, said, “By adding our MaaS Platform to AWS Marketplace, customers around the world can more easily access mobile software that can tech-enable not only critical operations but also customer and workforce engagement.”

On November 19, PHUN declared that it would begin processing the initial issuances of PhunCoin (PHCN), made available on the first blockchain-enabled transfer agent registered with the United States Securities and Exchange Commission (SEC). This mark’s the company’s step forward in building a market for one of the world’s first regulated cryptocurrencies for mainstream adoption.

PHUN’s net income and net income per share came in at $0.37 million and $0.01, respectively, up substantially from their  negative year-ago values, for the fiscal third quarter ended September 30. For the nine months ended September 30, the company’s net cash provided by financing activities stood at $17.55 million, registering an increase of 136.6% from the same period last year.

Analysts expect PHUN’s EPS to increase 66.7% year-over-year in the current quarter (ending December 2021). Likewise, the Street expects its revenue to increase 149.3% from the prior-year quarter to $5.03 million in the current  quarter.

Over the past year, the stock has gained 338.5% in price to close Friday’s trading session at $3.39. It has gained 169.1% year-to-date.

Two analysts that rated PHUN have rated it Buy. The 12-month median price target of $5.25 indicates a 54.9% potential upside. The price targets range from a low of $5.00 to a high of $5.50.

APPS shares were trading at $51.07 per share on Monday afternoon, down $2.18 (-4.09%). Year-to-date, APPS has declined -9.71%, versus a 26.36% rise in the benchmark S&P 500 index during the same period.

About the Author: Anushka Dutta

Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research. More...

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