Following numerous pivots since first launching in 1998, Digital Turbine (NASDAQ: APPS) now focuses on offering a variety of mobile-related services, mainly in digital advertising. It has its software pre-loaded onto mobile phones and helps users to find mobile apps and content. Following a spike of interest in the stock recently, we ask if Digital Turbine stock is a good buy.
The bull case for Digital Turbine
Digital Turbine is a company that knows how to navigate the turbulent tech world, often changing its focus along the way when things haven't been working to becoming a major player in the Android mobile market.
Large corporations such as Amazon and Netflix work closely with Digital Turbine in an attempt to have their apps pre-installed on Android devices. After relying on a small number of clients for a few years, Digital Turbine now has a diversified client base.
The user reach of Digital Turbine is now more than 600 million and it is a big player in the digital advertising space. It has recently made numerous acquisitions to improve revenue growth prospects going forward. This includes acquiring Appreciate ($22.5 million), AdColony ($400 million), and Fyber ($600 million). The plan is to utilize these investments to generate further cost savings and to gain entry into new markets.
Digital Turbine had a particularly strong 2020 and generated a net profit of $30.06 million in Q1 2021. It is in a stable financial position and has been generating an impressive return on equity (ROE). In its most recent quarter, ROE was almost 50%. Another big highlight is its net income growth of 68% over the last five years.
The bear case for Digital Turbine
Just like any company that experiences significant growth over a short period, there will be concerns about Digital Turbine's ability to keep up this momentum. Integrating significant acquisitions can also often pose a problem for companies.
A big question for investors is not if Digital Turbine is a good company, but if the current share price is too high to justify an investment. The company's stock price exploded from $7 last year up to nearly $100, before dropping to the $60-$65 range as of July 23.
The digital advertising space is also very competitive, with more and more players entering it as the years go by. Digital Turbine also has a heavy reliance on the mobile app ecosystems, Android in particular. Any crackdowns from regulators could throw a spanner in the works for Digital Turbine.
So, should I buy Digital Turbine stock?
Digital Turbine is a company that has realized what it does well and is focused on doing more of that. It is consistently reinvesting large portions of its profits and getting a good return on these investments. While earnings growth will likely slow down, Digital Turbine looks like it is a good long-term investment opportunity as the mobile services space grows ever larger.
Quickfire round
Who is the Digital Turbine CEO?
Bill Stone is the CEO of Digital Turbine.
Where is the Digital Turbine headquarters?
Digital Turbine has its headquarters in Austin, Texas.
Does Digital Turbine pay a dividend?
Digital Turbine does not currently pay a dividend to investors.
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
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