Canaccord Genuity upgrades System1 to 'buy'

Canaccord Genuity, which reiterated its 385.0p target price on the stock, said System1's early morning update highlighted "strong momentum" that was building in data products through what was "a pivotal year" for the group.

From an almost standing start, the success of System1's Test Your Ad offering, coupled with new customer wins, has seen full-year data revenues increase by £8.4m to an estimated £9.7m, representing year-on-year growth of approximately 560%.

As a result, data now provides 40% of the group's £24.1m revenues, in line with the analysts' estimates, with the contribution from its data increasing to 45% in the second half.

"We believe the success of System1's disruptive data-driven platform through FY22E provides much encouragement and the group has increased investment (as planned) in people, product, and go-to-market strategy to secure further growth as it attacks a $1.0bn advertising prediction market," said the Canadian bank.

"Investment is likely to continue to run at elevated levels through FY23E with the group expecting revenue expansion and higher profits to flow which will likely be weighted to the second half."

Canaccord added that System1 will hold a Capital Markets Day event on Wednesday afternoon to further discuss its operating model, prediction methodologies, and growth strategy.