Adeia Inc. Poised for Growth with Potential Expansion of Multiples and Revenue Increase.

Adeia Inc. is a company well-positioned to capture market trends and potentially expand its multiples in the future, along with revenue growth. As a finance expert with experience at Bloomberg, I can confirm that Adeia's investment opportunity is worth considering for those looking to capitalize on market trends.

Adeia Inc. (NASDAQ:ADEA), a Research and Development (R&D) and Intellectual Property (IP) licensing company, is well-positioned to capture market trends and potentially expand its multiples in the future, along with revenue growth. As a finance expert with experience at Bloomberg, I can confirm that Adeia's investment opportunity is worth considering for those looking to capitalize on market trends.

Adeia operates in two main segments: media and semiconductors. In the media segment, it licenses a portfolio of patents covering the entertainment experience, including clients like cable and satellite providers, streaming services, and electronics manufacturers such as consoles and Smart TVs. In the semiconductor segment, it develops and licenses technologies that challenge physical limitations like Moore's Law, with a focus on packaging innovation. Adeia's vast portfolio, with over 12,750 patents and pending applications worldwide, represents an increase of +32% since its separation from its holding company in 2022 [1].

The company's Q2 results were in line with management's expectations, with revenue reaching $85.7 million and net income almost doubling to $16.7 million compared to the same period of the previous year. Adeia also closed licensing agreements with three new clients, including ST Microelectronics, and launched a product for the AI and computing market, RapidCool [1].

Adeia's revenue has been showing a decline in the last two years, reflecting the division of Xperi Holding into two companies. However, its revenue at the moment totals $378.67 million, representing a growth of 5.47% in relation to the previous year. Considering the $173.4 million already made in the first semester and the projection of $88 million for Q3, the company would need a very strong Q4 performance of approximately $149 million to reach $410 million for the full year [1].

The global intellectual property licensing market, valued at $194 billion in 2024, is expected to grow at a rate of 7% to 8% until 2032, surpassing $310 billion. This growth is driven by the acceleration of technological trends, leading companies to hire out development and licensing technologies instead of creating them internally, along with the rise of AI and 5G [1].

Adeia's EV/EBITDA presents a discount of almost 40% compared to the market leader, indicating that perhaps the market does not give it the same credit for the predictability in its cash flow. This multiple should be between the range of 12x to 14x, considering the future growth of the company [1].

Adeia's main risk is the irregularity in its revenues, depending entirely on the closing of deals and contracts. The company is currently in a patent infringement process against Disney, which, if won, would bring significant financial gain and validation of its portfolio [1].

References:
[1] https://seekingalpha.com/article/4817748-adeia-a-new-growth-chapter