There is no shortage of TSXV listings that initially get a lot of hype, but that hype dies off after years of failing to generate any revenue. SuperBuzz Inc. (SPZ.V) has been one of those companies as it is down nearly 90% from when it first listed in 2022. The company has generated hardly any revenue according to past financial releases, but that is about to change with some great news announced this past week. The stock shot up 70% on the day of the news, but pulled back to close at $0.07 on Friday. This pullback enables investors to buy SPZ basically at the cheapest it has ever been, just as it is about to generate significant revenue. If you like our picks you can also follow this blog by clicking the follow button on the top of the left hand panel. We have 129 followers so far on here as well as 1,039 followers on our ValueTrades blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.
SPZ announced a strategic agreement with a global performance agency to scale AI-driven performance across 3,000 websites. As the company was pressed for more details about this news, it released a follow up disclosing that there is an estimated $6 million in revenue generated over three years. That is based on revenue of $165 per website per month, with deployment expected across 1,000 websites. Gross margin is expected to be 75%, with no other upfront costs. This would lead to $2 million in revenue per year with gross margin of $1.5 million. The company's burn rate is less than $0.5 million per quarter, so this deal takes it very close to a break even point. It's important to note that these assumptions lead to a 33% uptake from the agency. So the revenue could be as much as $6 million annually, as in the initial press release.
The company is well cashed up with a recent raise of $0.4 million in a debenture convertible at $0.12 and a $0.3 million equity financing at $0.15. Both deals came with substantial insider support. Buyers in the open market today are buying at half of these prices and with a far superior risk profile given the strategic agreement.
The company previously claimed in October that it can reach profitability in early 2026, having reduced its user acquisition costs and doubled its paying subscriber base by adding 361 paying subscribers in two months. Assuming similar margin and revenue numbers as the agreement above, the argument could be made that the new agreement takes the company into profitable territory.
With the balance sheet in good shape and with a clear path to break even operations, the big question mark remains how fast will the onboarding of 1,000 websites take place? The fact that CIRO pressed for more details before allowing the stock to trade again adds assurance that the company presented a reasonable amount of evidence that 33% uptake is achievable. The "hyped" press release mentioned deployment across 3,000 sites with an ARR of $6 million. The "scrutinized" press release assumed $2 million revenue a year across 1,000 websites.
It is unclear who the client is. If it is the agency itself is paying for the service per website or if the individual website owners pay the $165 per month in order to access it. The line in the first press release "By integrating SuperBuzz AI's proprietary optimization engine, the Agency expects to unlock new revenue streams, improve retention rates, and enhance overall user experience for its clients." suggests that the agency is the client and is offering a white labelled tool to the website owners. This provides added assurance that at least 1,000 site licenses and deployments will take place.
This contract means more than the numbers themselves. The company made a bold claim in its investor presentation of revenue growing from $0.1 million in 2025 to $17.3 million in 2027. This deployment makes that possible as securing one agreement of this nature should make it easier to secure more agreements of a similar nature.
The company has 35.8 million shares outstanding, 18 million warrants with an average exercise price of $0.19 plus the convertible debenture mentioned above. Given that these are all well out of the money, the company currently has a $2.5 million market cap. This is an absolute bargain with it trading at around 1x of annualized revenue run rate of this one deal plus the existing revenue base. Given the gross margins associated with the agreement, it is fair for it to trade at 5x revenue, or $10 million market cap. Fully diluted share count assuming all conversions and exercises of dilutive securities would lead to approximately 60 million shares outstanding. That is $0.17 per share.
Should the company achieve $17 million in revenue, a multiple of 3x would justify a $51 million market cap, or over $0.80 per share. Clearly there is a lot of upside here. One must also consider the hype potential of the stock. SPZ has a relatively benign but important and profitable use of AI. The stock has traded at much higher levels before, purely based on hype. Now it has revenue to back that up. The stock has the potential to move like Sparc Al Inc. (SPAI.CN) (SPAIF), a previous pick of ours, which has gone on a massive run.
We are initiating a strong buy call on SPZ with a wide range target of $0.15 to $1.00. It's an easy buy here at $0.07 but hard to tell where a near-term the top is. However, everyone buying here should be happy with at least a double. The long call is based on:
- $2 million revenue and $1.5 million gross margin annually. This justifies at least a 5x revenue multiple.
- $0.7 million raised in an equity financing at $0.15 and convertible debt at $0.12. This shores up the balance sheet and provides a floor valuation where insiders and accredited investors bought in.
- This first agreement should facilitate closing more deals of this nature and help the company achieve its $17 million revenue forecast for 2027.
- Adding this new agreement onto existing revenue leads to a good possibility that the company has achieved profitable operations as promised in the October press release.
- General hype in the AI sector should lift the stock. There are numerous AI companies that are valued more aggressively than SPZ, but are further away from profitability.
- The stock has historically traded well above $10 million in market cap when it was in a weaker financial position than it is today. A $2.5 million market cap is a bargain.
Disclosure: We are long SPZ.V
