Analysts at Maxim Group reiterated their ‘Buy’ recommendation for Paltalk Inc (NASDAQ:PALT) and $12 price target on its stock after the company reported strong third quarter financial results.
The Jericho, New York-based communications software company that powers multimedia social applications curretly trades at around $3.61 on the tech-dominated Nasdaq.
For the period ended September 30, 2021, Paltalk reported revenue of $3.4 million, which easily topped Maxim’s estimate of $3.3 million. Paltalk (NASDAQ:PALT)’s subscription revenue rose modestly year-over-year, while advertising revenue jumped 75% year-over-year off a small base.
READ: Paltalk launches its 'Paltalk Feed' message board feature to boost user engagement
“Results highlight the company's attractive business model...Going forward, we expect a greater focus on spending on areas to grow revenues,” the Maxim analyst wrote in a note to clients.
Paltalk reported adjusted EBITDA, or earnings before interest, taxes, depreciation, and amortization of $0.3 million, which was below Maxim’s estimate. However, free cash flow for the quarter was a positive $0.5 million.
The company ended September this year with $10.7 million in cash and no debt. An October equity raise brought cash to over $21 million.
“We believe the company will not need to raise additional capital for organic needs,” the analyst wrote. “We expect higher spending to spur faster top line growth. Paltalk is pursuing multiple initiatives to grow the company which we expect to accelerate given a stronger capital position.”
In 2020, the company launched various board games that can be played online and private rooms were rolled out this year. Maxim noted that advertising partnerships with firms like PubMatic are generating double-digit year-over-year advertising revenue growth.
“The company has historically under-invested in marketing spend, given most users came organically. Management is now planning to invest more in acquiring new customers,” wrote the analyst.
“Subscriber growth and engagement is being built through 1:1 social interaction, loyalty rewards, and adding influencers to the company’s sites. Private labeling the video technology, IP licensing, and M&A could also provide upside.”
After declining 16% in 2020, Maxim said it now projects revenue growth for Paltalk.
“We largely maintain our estimates which include year-over-year revenue growth of 4%, 4%, and 11% for 2021 through 2023,” wrote the analyst.
Paltalk is a communications software provider that develops multimedia social applications. The company's product portfolio includes Paltalk, Camfrog, and Tinychat for live video chat. Other popular products include Tinychat and Vumber, a telecom app that enables users to have multiple phone numbers in any area code through which calls can be forwarded to a user's existing cellphone or landline.
Contact the author Uttara Choudhury at uttara@proactiveinvestors.com
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