Dotdigital Group plc (LON:DOTD) has come a long way from its origins as an email marketing service, says Peel Hunt.
The broker has initiated coverage of what we are now obliged to refer to as the operator of an “AI-driven omnichannel marketing automation platform” with a ‘buy’ recommendation and a 135p target price.
READ: Three pillars of wisdom continue to fuel dotdigital’s impressive performance as omni-channel transformation bears fruit
Dotdigital shares currently trade at 98.5p.
The transformation from an email marketing service was sparked by its “ingenious acquisition” of Comapi in 2017, Peel Hunt asserts.
“In a highly fragmented market (c£3.6bn in 2018), we rely on aggregated customer reviews. On metrics like value for money, quality of products, and satisfaction, Dotdigital is ahead of its direct mid-market peers,” the broker claims.
Peel Hunt likes the way the company’s dotmailer product is taking advantage of changing habits and has expanded into text messaging and Facebook to increase its average revenue per user and its clients’ return on investment.
Is convenience the new brand loyalty? That’s exactly what our panel are currently discussing at #eCommerceLiveUK @dotmailer pic.twitter.com/HudZ8c3ohv
— UKFast (@UKFast) September 20, 2018
The new rules on data protection – GDPR – should be a “net benefactor” to a company well versed in ensuring its clients do not fall foul of regulations.
Peel Hunt also believes Dotdigital is “becoming more vital for client effectiveness through AI [artificial intelligence] to target ‘captive audiences’ to drive incremental revenue, sell more goods at full price, and increase value from existing products”.
Despite all this, Dotdigital’s valuation is around 31% below its peers, according to the broker’s calculations, with its enterprise value (market capitalisation adjusted for cash and debt) running at just 16 times annual underlying earnings (EBITDA), versus a multiple of 23.3 for its peers.
“We see multiple interesting opportunities for Dotdigital to tap into the nascent £3.6bn global marketing automation market as it executes geographic expansion and product innovation,” the broker said.