My New UK Growth Stock

Summary

In this video, the speaker discusses their recent investment in AudioBoom, a UK growth stock. Despite facing challenges like changes in the advertising market and Apple’s iOS updates, AudioBoom is poised for significant growth. The company’s new Showcase platform is driving revenue and profitability with strong growth, contributing 31% of their revenue. The stock has shown positive momentum, with profit upgrades and a promising future outlook. While the company’s small market cap presents some risks, the speaker sees substantial upside potential, making AudioBoom an attractive investment for those seeking growth in the podcasting industry.

Takeaways

• 😀 AudioBoom is a UK-based podcasting platform that connects creators with advertisers, helping to monetize podcasts more effectively.
• 😀 The stock has shown solid growth recently, with the investor up around 20% on their position in just a couple of weeks.
• 😀 AudioBoom's new Showcase platform has rapidly grown, contributing to a 99% increase in revenue for that segment, and now makes up 31% of the business's total revenue.
• 😀 The company has shed its loss-making contracts with creators, which were previously auto-paid regardless of performance, improving profitability.
• 😀 In Q3 2023, AudioBoom's revenue grew by 34%, marking a strong recovery from the previous years' downturns caused by the pandemic and the advertising recession.
• 😀 The company is now seeing two consecutive profit upgrades, and analysts estimate EPS to rise from 14p to potentially 19p, boosting its valuation.
• 😀 Showcase, with its higher profit margins (31%), is expected to continue driving growth for the company, outpacing other parts of the business.
• 😀 The stock’s current valuation is around 19-20 times earnings, but the company’s future growth could push the valuation to 25-30 times earnings.
• 😀 Risks include the small market cap of £61 million, making liquidity an issue, as well as market shifts in podcasting and potential changes to Apple's iOS.
• 😀 The company is poised for strong profitability in 2024, with the end of creator payments and a return to growth in advertising markets, making it an attractive UK growth stock.

Q & A

What is AudioBoom, and what role does it play in the podcasting industry?

AudioBoom is a platform that powers podcasting by enabling creators to distribute their content to platforms like Spotify and YouTube. It also connects podcast creators and networks with advertisers, generating revenue through ad placements. Essentially, it acts as an advertising platform for podcasts.

Why is AudioBoom considered a UK growth stock?

AudioBoom is considered a UK growth stock due to its potential for significant revenue growth, especially driven by its Showcase platform. The company is poised for profitability improvements, driven by the end of loss-making contracts with creators and the recovery of the advertising market.

What recent catalysts have contributed to AudioBoom's stock price rise?

Recent catalysts for AudioBoom's stock price increase include strong trading updates, insider buying, and the success of its new Showcase platform, which is driving higher profitability. Additionally, the company's improved financial health following the end of creator contracts has also helped boost investor confidence.

How has the Showcase platform contributed to AudioBoom’s growth?

The Showcase platform has significantly contributed to AudioBoom’s growth by offering more targeted ads that benefit both creators and advertisers. This has improved profitability due to better gross margins compared to other platforms, and it has seen rapid revenue growth, making up 31% of the business’s total revenue as of now.

What was the impact of the coronavirus pandemic on AudioBoom’s stock performance?

During the pandemic, AudioBoom’s stock saw a significant surge as podcast listenership and advertising revenues grew. However, as the pandemic ended, the company faced a sharp slump due to reduced podcast listening and a downturn in advertising spending, as well as changes in Apple’s iOS downloads affecting the business.

How has the end of creator contracts impacted AudioBoom’s profitability?

The end of creator contracts, which guaranteed minimum payments even during periods of low engagement, has positively impacted AudioBoom's profitability. These contracts were a drain on the business when creators were paid despite lower viewership, but with these contracts now over, AudioBoom is better positioned to increase profitability.

What are the current profit expectations for AudioBoom, and how have they changed recently?

AudioBoom’s profit expectations have recently been upgraded. In November 2023, the company reported a profit ahead of expectations, and in December, another profit upgrade occurred. Analysts now expect earnings per share (EPS) to increase, potentially reaching 19p, indicating strong growth prospects.

What financial metrics suggest that AudioBoom may be undervalued at its current price?

At its current price, AudioBoom is trading at approximately 20 times earnings, which may be undervalued considering the company’s growth potential, especially with the Showcase platform expanding rapidly. If profitability continues to improve, the company could trade at higher multiples, suggesting upside potential.

What are the potential risks associated with investing in AudioBoom?

Key risks for investors in AudioBoom include its smaller market cap, which could create liquidity issues, and its dependence on the advertising market, which can be volatile. Additionally, changes to Apple’s iOS system and other external factors could potentially impact the company’s growth.

What is the long-term growth outlook for AudioBoom, according to the script?

The long-term growth outlook for AudioBoom is optimistic, with analysts expecting the company to potentially reach £260 million in revenue by 2030. The company is well-positioned for growth due to the expansion of its Showcase platform, improving profitability, and the broader podcasting industry’s expected growth.