Top insiders within a company buying its stock can be a bullish sign. These insiders - a group that includes CEOs, board directors, and major shareholders - likely have a deeper understanding of the company's financial health and strategic plans than the average investor. So, their insider purchases might suggest they believe the stock is undervalued.
One stock that has been the target of heavy insider buying lately is Cardlytics (CDLX), with a major stakeholder dropping multi-millions on the shares this March after a long period of inactivity. At the same time, CDLX shares have been unusually volatile. Could there be more upside in store? Let's take a closer look.
About Cardlytics Stock
Cardlytics (CDLX) is a data-marketing firm that operates in the financial services sector, specifically in the targeted advertising space. They partner with banks to analyze customer purchase data, and then offer those customers personalized deals from merchants. Its market cap currently stands at $893 million.
Cardlytics shares have been on a wild ride this March. After gapping higher on well-received earnings around mid-month, the shares surged again to start the week, adding 27% in Monday's session. Then, they backtracked all the way toward their earnings-day lows on Tuesday, losing 32.8% by yesterday's close as investors reacted to news of a senior notes offering.
On balance, CDLX is up 47.6% on a YTD basis.
Major Shareholder Buys Shares Worth More Than $13M
Clifford Sosin, a major shareholder in the company, purchased more than 1 million Cardlytics shares recently. The purchases were made through his CAS Investment Partners, which now owns a stake approaching 14.5% in CDLX.
On March 18, CAS bought a total of 661,715 shares of the company at an average price of $13.5464 per share, with the transaction amount totaling $8.96 million. On March 19, 350,000 shares were purchased at an average price of $14.1601 per share, worth about $5 million.
In total, CAS purchased $13.91 million of Cardlytics shares over two days, which is just over 1.5% of the company's market cap.
Notably, this is Sosin's first purchase of the company's stock in more than two years. The share price for Cardlytics has fallen considerably from Sosin's last purchase in January 2022, when he invested roughly $15 million in CDLX between $62 and $66 per share.
CDLX Rallies On Strong Q4 Results
The insider buying on CDLX follows Cardlytics' not-so-dismal results for the fourth quarter - an upside surprise that was immediately reflected in the stock's performance the following day, when it ended more than 77% higher.
In Q4, Cardlytics reported total revenues of $89.2 million, up 8.1% from the previous year. A yearly rise of 4.6% in billings to $131.9 million helped to boost overall revenues.
The company reported a loss of $2.56 per share, which was wider than the consensus estimate of a loss per share of $0.23. However, it came in much narrower than the previous year's loss of $11.32 per share - and the company eked out a full-year profit of $4 million on an EBITDA basis. Overall, over the past five quarters, Cardlytics' bottom line has surpassed consensus expectations in three quarters.
The company also reported growth in monthly active users (MAU), up 7.1% to 168 million, compared to 156.9 million in the fourth quarter of 2022.
Looking ahead, forward revenue growth for CDLX is pegged at 8.53%, which is above the communication services industry median of 3.13%.
Unique Strategic Advantages
Cardlytics' unique position in the digital marketing space, with access to large datasets, could be a boon for the company as artificial intelligence (AI) adoption progresses.
Notably, Cardlytics has access to 50% of card swipe data in the United States, covering over 168 million bank customers. This is due to its partnerships with large banks, where the company's sizable network of bank partnerships - including four out of the five largest banks domestically - gives it access to this data. By leveraging these stats, Cardlytics uses its powerful digital advertising platform that enables companies to develop and control targeted marketing campaigns based on consumer purchase data.
The company also offers its partners access to the purchase data through revenue-sharing agreements, providing it with another key revenue source.
Lastly, Cardlytics' acquisition of cash-back-focused fintech platform Dosh in 2021 has provided the former with access to the latter's partners, which include many fintech players and “neobanks,” such as Venmo, Betterment, and Ellevest. This is expected to make Cardlytics an even stronger player in the underbanked category.
What Do Analysts Expect for CDLX?
Analysts have deemed CDLX stock a “Strong Buy,” with a mean target price of $17 and a high target price of $18. Although the stock has traded above both price points very recently, CDLX ended Tuesday's trading with room to run about 25% up to its mean price target.
Out of 3 analysts covering the stock, 2 have a “Strong Buy” rating and 1 has a “Moderate Buy” rating. That's improved from one month ago, when the stock had a consensus “Moderate Buy” recommendation on Wall Street.
