RR Media Loved By Benchmark Analysts; It's Cheap And Is Building Scale

• RR Media Ltd (NASDAQ: RRM) shares are down 1 percent since September 3.
• Benchmark’s Daniel L. Kurnos initiated coverage of the company with a Buy rating and a price target of $12.
• RR Media is a scaling content distribution play, while its stock is currently inexpensive, Kurnos said.

RR Media is a leading, global provider of B2B content management and distribution. Analyst Daniel Kurnos said that the stock had garnered little attention on account of the company’s foreign domicile, minimal coverage and a “seemingly complicated story.”

Kurnos added, however, that there were three simple reasons to invest in the stock:

1. Although the industry continues to be highly fragmented, RR has achieved scale with a unique product. Both scale and the product made the company “a synergistic consolidator as well as a prime acquisition candidate”
2. The estimate of 3-6 percent organic growth does not reflect the substantial opportunities in the OTT or live streaming verticals, while also excluding potential upper-tier, new partner wins and add-on capabilities
3. Shares look undervalued in view of the company’s consistent EBITDA margin expansion.

In the report Benchmark noted, “The rapid development of the multi-screen environment has also given rise to increasing content distribution and management costs. As a result, both content providers and distribution partners have been forced to realign business models and reallocate spending to address the new market dynamics.”

Several smaller players in the B2B space have not been able to adapt, or find it too costly to change their business model. Kurnos expects RR Media to continue to acquire such players, “deriving instant synergies through scale and expanded reach.”