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Eagle Eye Solutions: Promising performance in a growing industry

Publication Date: 12 Jul 2019 - By Manika Premsingh By Manika Premsingh
Actionable
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Equity Fundamental Equity EU ex-UK UK Technology

Marketing technology provider Eagle Eye Solutions (LON:EYE) has had a good 2019 at the equity markets so far. After falling to the lowest in over two years in January, the share price was up by almost 90% at the at the time of writing.

New Contract boosts share price

The story of share price increase has been marked with positive developments since it hit its nadir in January. The low did not last long and price started recovering soon after. This can partly be interpreted as an expected bounce-back after a sharp decline and also because of the new contract the company signed with Waitrose and Partners, adding to its list of big retailer clients. It was already doing business with J Sainsbury, Tesco and Marks and Spencer.

Eagle Eye supports its customers through its digital marketing platform Eagle Eye AIR. The platform allows for managing digital offers and rewards and creates a network between merchants, distributors and brands.

Latest results are healthy

The company’s performance for the last six months of 2019 released in March, 2019 kept up the share price momentum, even if there was no spike around the day of release. The financial update showed a 30% increase in revenue compared to the same period in 2018. Notably, cost of sales actually declined by 20%, resulting in a 36% increase in gross profit. However, high operating costs driven by staff expenses, infrastructure and product investments resulted in an EBITDA loss.

It is worth noting, however, that the extent of EBITDA loss actually declined by 79% to £0.3m from £1.4m last year, which makes the company positive about soon hitting profitability on the metric. It is also ramping up across geographies like UK, Canada, Australia and New Zealand. Greater geographical dispersion is a positive step particularly for macro-economic and policy risk diversification.

North American partnership

Concrete signs of expansion in non-UK geographies were seen in May, when the company announced its partnership with News America marketing, a marketing services provider in the US and Canada to deliver ‘next-generation retailer and brand marketing solutions’ as per the company press release. Notably, the share price showed another discrete upward jump just after this release. With the US being the biggest international market in loyalty management according to industry research provider Mordor Intelligence, it is evident why the news was perceived positively. Mordor further expects the industry as such to grow rapidly over the next few years, with an expected CAGR of 23.3% over the 2019-24 period.

Conclusion: This bodes well for Eagle Eye Solutions, which is still a young company, having been founded only in 2003. The industry outlook remains positive. It is little wonder then that the analysts who do cover the stock, have given it a ‘buy’ rating. The story is strengthened further by the fact that the share price might have risen in the recent months, but it is still trading at 40% lower levels than the highest levels last seen in 2017, making it a decent buy. 

Disclosure:

I have no positions in any of the securities referenced in the contribution

I do not use any non-public, material information in this contribution

To the best of my knowledge, the views expressed in this contribution comply with UK law

I agree with the terms and conditions of ReachX

This contribution is for informational purpose and does not constitute investment advice nor is it an offer to sell or buy, nor is it a recommendation for any security.

Manika Premsingh

 

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