Main menu button

Initiation of coverage Adverty: Hidden values about to be revealed

25 Jan 2023

Read the full report here:

Equity research, Adverty

Adverty has developed an in-game advertising solution for game developers. With a patented method for determining the visibility of ads in 3D games, the company is well-positioned when demand takes off. Carlsquare Equity Research initiates coverage on Adverty with a fair value of SEK 4.9 per share for the next 6-12 months.

In-game ads, an upcoming revenue source for game developers

Advertising is one of the most common revenue models for mobile games. Adverty’s solution enables game developers to generate revenue from in-game ads for games mainly on mobile platforms, AR, VR and MR. In-game ads are integrated as part of the game environment, for example, via billboards in a sports game. Compared to traditional banners and interstitial ads, in-game ads are considered less disruptive to the gaming experience. This feature is beneficial for both advertisers and game developers.

Rising demand for in-game ads and a hidden value in technology

In parallel, the in-game ads market is still in its infancy but is expected to multiply in the coming years, given the large audience that exists in the gaming world. That has also made the company’s market highly competitive. In our view, a prominent growth driver is the new guidelines for in-game ads in 3D games developed by the industry body Interactive Advertising Bureaus (IAB). This help to clarify the value of in-game ads. We believe this will drive demand, the market and the company’s continued growth.

According to the IAB’s guidelines, several criteria must be met for an ad to be classified as viewable, create value and thus trigger a payment from the advertiser. Adverty’s method for measuring whether an in-game ad in 3D games is viewable (in line with the IAB guidelines) is patented – and could close out the competition. However, as an external part, it isn’t easy to assess the strength of the patent. But patents are an asset that may take the company to a leading position in the market.

Low valuation, given growth and profitability potential

In 2022, the number of games on the platform almost doubled to around 250. For 2022, we anticipate revenues to increase by 195 per cent to SEK 14.1 million. We expect a continued rapid growth rate over the coming years – a CAGR, 2021-2025 of 146 per cent. In parallel, with a scalable platform, we expect gross margin to rise quickly and normalise at 40 per cent in 2025, the same year a positive EBITDA result is anticipated. Over time, we expect the EBITDA margin to increase to 14.4 per cent. If the strength and value of the patents can be made clear, a significant upside in our forecasts and valuation is created.

Combining a DCF model with multiple valuations, a fair value of SEK 4.9 per share is calculated for the next 6-12 months. Our valuation corresponds to an EV/Sales multiple of 2023 of 4.6x and a valuation multiple on expected sales, adjusted for revenue sharing (50 per cent) 2024, of 4.1x. The reference group, consisting of companies in Adtech, is currently trading at an EV/Sales multiple 2023 of 3.8x.


Carlsquare AB,, hereinafter referred to as Carlsquare, is engaged in corporate finance and equity research, publish-ing information on companies and including analyses. The information has been compiled from sources that Carlsquare deems reliable. However, Carlsquare cannot guarantee the accuracy of the information. Nothing written in the analysis should be considered a recommendation or solicitation to invest in any financial instrument, option, or the like. Opinions and conclusions expressed in the analysis are intended solely for the recipient.

The content may not be copied, reproduced, or distributed to any other person without the written consent of Carlsquare. Carlsquare shall not be liable for either direct or indirect damages caused by decisions made on the basis of information contained in this analy-sis. Investments in financial instruments offer the potential for appreciation and gains. All such investments are also subject to risks. The risks vary between different types of financial instruments and combinations thereof. Past performance should not be taken as an indication of future returns.

The analysis is not directed at U.S. Persons (as that term is defined in Regulation S under the United States Securities Act and inter-preted in the United States Investment Companies Act of 1940), nor may it be disseminated to such persons. The analysis is not di-rected at natural or legal persons where the distribution of the analysis to such persons would involve or entail a risk of violation of Swedish or foreign laws or regulations.

The analysis is a so-called Assignment Analysis for which the analysed company has signed an agreement with Carlsquare for analy-sis coverage. The analyses are published on an ongoing basis during the contract period and for the usually fixed fee.

Carlsquare may or may not have a financial interest with respect to the subject matter of this analysis. Carlsquare values the assur-ance of objectivity and independence and has established procedures for managing conflicts of interest for this purpose.

The analysts Markus Augustsson and Bertil Nilsson do not own and may not own shares in the analysed company.

Initiation of coverage Adverty: Hidden values about to be revealed