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Digital Turbine Inc. - Initiation Note

Digital Turbine Inc.

BUY (APPS, $3.50)

Monetizing The Mobile Phone Home Screen - Initiating With A BUY Rating & $10 Price Target

March 25, 2015

Ilya Grozovsky

212.417.8219

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Investment Conclusion. We are initiating coverage of Digital Turbine (APPS) with a BUY rating and $10 price target. In our view, the company’s product platform holds the key for carriers to participate in the mobile app economy, which up until now has totally bypassed them. The carriers own the most coveted real estate on the mobile device – the home screen – and Digital Turbine helps them monetize it. For app developers, the ability to be pre-installed on a mobile device home screen helps them cut through the clutter of the app store which has over one million apps to choose from. This industry dynamic coupled with Digital Turbine’s agreements with mobile carriers leads us to believe that solid execution should translate to significant revenue growth for Digital Turbine. We believe that the company’s agreement with Verizon (NYSE: VZ, $49.72, Not Rated) to install DT’s Ignite on every Android device they sell going forward, on its own could power our estimates with other carriers providing upside to our numbers. For calendar 2015, we are estimating revenue and adjusted EBITDA of $93 million and $5 million, respectively. For calendar 2016, we are estimating revenues and adjusted EBITDA of $184 million and $22 million, respectively. Our price target of $10 per share is based on our belief that Digital Turbine shares should trade at an approximate 30% discount to the comparable company average EV/Sales ratio of 2.8x as compared to the current 75% discount. The greater than 30% upside to our price target results in our BUY rating on the shares.

APPSSource: Company Reports, National Securities Corporation Estimates

Company Profile

Digital Turbine, Inc., founded in 1998 and headquartered in Austin Texas, is delivering end-to-end products and solutions for mobile operators, device original equipment manufacturers (OEMs) and other third parties to enable them to monetize mobile content. Digital Turbine’s solutions are used by more than 31 million customers each month across more than 20 global operators. The Company provides mobile solutions to brands, including Verizon, AT&T, Vodafone, Telefonica, Turkcell, Telecom Italia, SingTel, Smart, Telstra, Cricket, Singtel Optus and others...


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