On a few occasions this year, we’ve taken a close look at Cardlytics $CDLX , a marketing firm that powers offers on financial institution websites. We fortunately passed each time: the stock is down 92% (!) year-to-date following a 53% (!!) decline on Wednesday.
The catalyst was a disappointing third quarter report, with particularly dispiriting guidance for the fourth quarter. Cardlytics is guiding for a year-over-year decline in billings and adjusted contribution (essentially adjusted gross profit). That’s a huge problem for a stock that is guiding for full-year Adjusted EBITDA margins of ~-15% excluding stock-based comp, which should run at another ~15% of revenue.
CDLX did see a nice bounce on Thursday (+25%), but fundamentally there are still huge questions. The stock is simply not as cheap as it looks. With a market cap of ~$190M at the current price and net debt of ~$87M, for an enterprise value of ~$277M. The disastrous acquisition² of Bridg still requires earnout payments of ~$68M in cash and ~$127M in stock.
Pro forma for the earnout, EV gets to ~$470M. Based on guidance, that’s 1.4x 2022 revenue and more than 3x adjusted contribution. Neither multiple seems all that attractive. Again, this is a business that is guiding for a y/y decline in the current quarter and posting EBITDA margins of -30% or so when accounting for stock-based comp.
But taking the long view, there is a reason to at least be intrigued, and some logic to the market’s bottom-fishing on Thursday. Cardlytics does have major partners among banks. It’s moving customers onto a self-serve ad platform, a move that should be done by next year. That will add features to an experience that, at the moment, is quite bland:
A new CEO, Karim Temsamani, comes from Google and Stripe. He follows the company’s co-founders, under whom execution does not appear to have been on point (the Bridg deal just one example). The stock has had some ardent bulls, and though those bulls are way underwater, we’d point to Richard Chu’s Substack for a interesting and detailed qualitative bull case.
Chu’s quantitative assumptions were clearly overly optimistic, but below $6 that’s far less important. The reason we passed on CDLX at $50 and $30 was that, even down big from 2021 highs, the stock simply didn’t look cheap.
It still doesn’t. But the stock is cheap enough to be a bet on the business working at all. Maybe that’s through operational improvements, better leadership, and cost savings that should aid 2023 results. Maybe it’s through an expansion into more local offers, or an acquisition (Cardlytics’ rival Figg was purchased by Chase in July).
It’s so difficult to step into a stock like this in a market like this. But it’s understandable why some investors took the plunge on Thursday. And for a lower-risk play on Cardlytics, it’s worth noting the company’s busted (I mean, really busted³) 2025 converts have a yield-to-maturity of 31%.
Update, Mar 2023. Almost zeroed.
Last updated: 2026-03-07 by automated standardization process