TechTarget, Inc. (TTGT, $82.74): “On Target to Exceed Expectations”
By: Natalie
Frey, AIM Student at Marquette University
Summary
- TechTarget,
Inc. (NASDAQ:TTGT) provides informational content for the buyers of
corporate IT products. The Company collects data and provides analytics on
content consumption in order to connect sellers to buyers and maximize sales
execution for IT providers.
- Product announcements made during summer of 2021 provide greater access, focus, and visibility into content consumption for use in analytics.
- New product features suggest a likely price increase for TTGT products in the near-term, offering a revenue boost to base revenue estimates for FY22 and on.
- In August of 2021, TTGT acquired Xtelligent Healthcare Media, a B2B media content company offering similar services to those provided by TTGT, with a focus on the healthcare IT vertical
- Q2 earnings exceeded estimates for top-line and earnings growth (~6% favorable earnings surprise). The Q3 earnings release is scheduled for November 3, 2021.
Key
points: TechTarget, Inc. remains 'in-play'. While the price saw little
movement during Q2 and most of Q3, toward the later months of the third quarter
the stock began to gain traction. Currently, TTGT stands at $82.74 per share,
which is up approximately 8% from its addition to the fund. While this growth
in share price demonstrates positive movement, the stock has not yet lived out
the thesis which states a target price of $92.70.
Given the positive earnings surprises
seen in Q2, the original thesis appears to hold true at this time in its
argument that TTGT still has room to grow. During 2020, TechTarget acquired
BrightTALK, a webinar hosting platform primarily to expand the firm’s reach
into the corporate IT market. During 2021, BrightTALK registered users have
been integrated into the Priority Engine product offered by TTGT and this has
provided revenue synergies above previous expectations for Q2 of 2021. With
synergies resulting from the acquisition hitting TTGT’s P&L faster and at a
greater level than originally expected, the markets are favorably surprised by
the firm’s agility in creating value from strategic acquisitions. This provides
good reason to be optimistic about the likely benefits to come from the recent acquisition
of Xtelligent.
In addition to the favorable
impacts of prior year acquisitions, TechTarget announced a new product during
the summer of 2021. The product that was announced in June was the new and
improved version of the legacy product, Priority Engine. The new version adds
significant enhancements to the legacy platform with account visibility that is
2x that of the legacy system and enhanced access to content consumption information.
While these additions may seem like minor refinements of existing features, the
impact for sales reps utilizing TTGT has been significant.
With the successful integration
of BrightTALK users into TechTarget’s core platform, the impactful new product launch,
and continued focus on growth and improvement of existing product lines, TTGT
is on a steady path to achieving a higher value. The consensus analyst recommendation
supports this argument, with the average price target having risen to ~$100.
What
has the stock done lately?
Since the release of Q2 earnings,
the stock has risen approximately 12%. The positive earnings surprise has the
market taking a second look at their expectations for TechTarget’s growth
potential. The recent momentum demonstrates the likely start of a gradual climb
for TTGT’s share price in the coming months.
Past
Year Performance: The YTD returns stand at 37.5% for TTGT, with the
1Y return rising to 64.4%. The YTD returns demonstrate impressive growth, but TechTarget
remains undervalued according to the original thesis the stock was pitched on and
much of the street’s valuation estimates. With the price beginning to climb after
a multi-month stretch of low movement, TTGT’s share price is likely to continue
climbing in the near-term.
My
Takeaway
TechTarget’s success in integrating
BrightTALK’s registered users into the core product platform has driven synergies
that exceed expectations, both in magnitude and time of realization. The release
of a positively received new version of Priority Engine has expanded the value
offered by TechTarget’s products and services for both clients, and end-buyers.
With high quality content, the buyers of corporate IT are able to access
high-quality information and be efficiently connected to sellers based on
consumption data. The sellers of IT have even more to gain from TTGT’s enhanced
offerings and increased user base, making top choice in sales development
tools.
