Index falls as earnings results weigh; pound above $1.33, Bodycote soars
On Monday, Benchmark analyst Mark Zgutowicz revised the price target for Criteo S.A. (NASDAQ:CRTO) shares, reducing it to $55 from the previous $60, while still upholding a Buy rating for the stock. Currently trading at $33.90, InvestingPro analysis suggests the stock is undervalued, with additional upside potential beyond the analyst’s target. The adjustment follows expectations of first-quarter performance exceeding initial forecasts, attributed to less severe foreign exchange (FX) headwinds and a stronger Retail Media (RM) take rate in January, which benefited from robust fee growth at the close of the retail fiscal year.
Zgutowicz noted that the early February guidance anticipated a $5 million impact from foreign exchange challenges, but the actual conditions were more favorable. However, he has not yet factored in potential FX tailwinds for the second quarter, which could arise from the recent depreciation of the U.S. dollar against major currencies, as further insights into the demand landscape are needed.
Looking ahead, the analyst anticipates tougher year-over-year growth comparisons for the second quarter due to one-time factors from the previous year, such as partner revenue and bad debt reversal. Consequently, he projects that the Retail Media cost-excluding-traffic (CexT) growth for the second quarter, on a constant currency basis, will fall short of the first quarter’s performance. Despite these challenges, InvestingPro data shows Criteo maintains robust financial health with a perfect Piotroski Score of 9 and a strong current ratio of 1.17, indicating solid operational efficiency and liquidity management.
Additionally, Zgutowicz pointed out that the second quarter’s operating income may appear weaker due to a planned company-wide employee event, estimated to cost approximately $10-$11 million, which could impact the adjusted EBITDA margin by roughly 100 basis points. In light of these factors, the second-quarter RM CexT forecast has been lowered to $62.0 million from $67.9 million, and the full-year estimate is now at the lower end of Criteo’s 20%-22% year-over-year guidance range.
The analyst concluded by expressing a need to wait for an update on the demand environment before making further assessments. Despite the reduced price target, the maintenance of a Buy rating suggests that the analyst still sees potential in Criteo’s stock performance. This view is supported by the company’s impressive 17.91% return over the past week and its conservative debt profile, with a debt-to-equity ratio of just 0.1. Investors seeking deeper insights can access Criteo’s comprehensive Pro Research Report, along with 12 additional ProTips and extensive financial metrics, through an InvestingPro subscription.
In other recent news, Criteo S.A. has reported impressive fourth-quarter results for 2024, exceeding market expectations. The company saw a 2% increase in Contribution ex-TAC, surpassing consensus estimates, and its adjusted EBITDA was 22% higher than anticipated. Following these results, BMO Capital Markets raised its price target for Criteo to $60 from $48 and reaffirmed an Outperform rating. Additionally, Benchmark analysts maintained a Buy rating with a $51 target, expressing optimism about Criteo’s potential and noting the stock’s decline from August highs as an attractive entry point.
DA Davidson also kept a Buy rating with a $53 price target, despite adjusting financial estimates due to currency exchange challenges. The firm revised its fourth-quarter Contribution ex-TAC estimate to $326.3 million and adjusted EBITDA to $116.5 million. In terms of company leadership, Criteo appointed Frederik van der Kooi as the new Chairperson of its Board, with Stefanie Jay nominated for election to the Board. These developments indicate Criteo’s strategic positioning and potential for growth, as analysts remain confident in its future trajectory.
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