I think the market volatility we’ve seen recently has thrown up some interesting opportunities. Not only with the blue-chips of the FTSE 100, but also among smaller companies. Here’s one penny stock that has caught my eye.
Tuning in
Audioboom Group (LSE: BOOM) is a London-based global podcast publisher. It connects podcasters and advertisers with tens of millions of listeners.
It offers hosting, publishing, distribution, analytics and monetisation services and has partnerships with all the major platforms, including Apple Podcasts, Spotify, and Amazon Music.
According to Edison Research, it was the fourth largest podcast publisher in the US between October 2021 and September 2022.
Its popular titles include No Such Thing As A Fish, the UK’s Cycling Podcast, and F1: Beyond the Grid. And it recently announced a partnership extension with Formula 1 up to 2025.
Strong results
“The story of 2022 was of record revenue, record adjusted EBITDA profit, and record cash generation for Audioboom.”
Stuart Last, CEO of Audioboom
On Thursday, it released solid annual results for 2022. Revenue was up 24% year on year to $74.9m. That was significantly ahead of overall industry growth of 15%. Adjusted EBITDA profit rose 15% to $3.6m.
It averaged monthly downloads of 117m, a 19% increase. And its monthly brand advertiser count rose significantly, up 60% to 5,257. Management attributed that big jump to its ‘Showcase’ advertising marketplace that works with the likes of LinkedIn and Sky.
Chairman Michael Tobin commented that this boosted market share and the business is “fully primed” for further growth in 2023.
Indeed, the company declared its first ever dividend in light of this operational progress. The planned payout is for at least 8p per share and is scheduled for 2024.
Despite this, the shares have fallen 77% in 12 months. Much of this decline is due to a slowdown in the digital ads market. Major tech companies such as Alphabet and Meta have recently reported that brands and retailers have cut back on advertising.
There’s a risk that a further deterioration here could harm the firm’s growth trajectory and threaten its profitability. However, I’m encouraged that the company has so far managed to carry on growing despite this downturn.
Plus, the company did have $8.1m in cash at the end of 2022, with an additional $1.8m available via an undrawn overdraft. I think that should be sufficient to see out this weakness in digital adspend without the need to raise more capital through the sale of shares.
A potential rebound
Reports last year suggested that Spotify and Amazon were interested in acquiring Audioboom. However, no concrete bids ever materialised. But I think interest may be rekindled now that the company’s market cap stands at just £68m.
All in all, I think the firm’s future looks promising. Over 400m people listen to podcasts today, and that figure is growing every year. And I fully expect the digital ad market to recover at some point, with the company in a strong position due to the additional advertisers it has signed up.
So I believe there’s the potential for a rebound in the share price. And if I had some spare cash to invest, I’d buy this penny stock today.
