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On Thursday, Benchmark analyst Mark Zgutowicz revised the price target for Taboola (NASDAQ:TBLA) shares, lowering it to $4.50 from the previous $5.00, while still maintaining a Buy rating for the stock. The stock, which has declined over 17% in the past week and is trading near its 52-week low of $2.87, remains under pressure following Taboola’s first-quarter and full-year 2025 outlook. Zgutowicz described the outlook as clearly disappointing, particularly in light of a significant deceleration in growth expected for the company’s core native advertising business. According to InvestingPro analysis, the stock’s RSI suggests it’s currently in oversold territory, with 12 additional real-time insights available to subscribers.
Taboola’s guidance for 2025 suggests a downturn in year-over-year growth for its native ads segment, a development that was unexpected to some extent and is seen to add pressure on the company’s projections. This comes in conjunction with Yahoo’s 2024 estimated revenue excluding traffic acquisition costs (ex-TAC), which fell short of expectations, amounting to roughly $450 million in gross revenue. Despite these challenges, InvestingPro data shows Taboola maintains strong fundamentals with a current ratio of 1.35 and impressive revenue growth of 22.68% in the last twelve months. Yahoo’s performance in 2024 was notably underwhelming, and the forecast for 2025 predicts flat year-over-year gross revenue, with any increase depending on Yahoo advertisers purchasing more premium inventory sources.
The company is shifting focus towards its new product, Realize, transitioning from native advertising to direct response/performance marketing. The strategy aims to leverage Taboola’s scalable first-party data, products, and artificial intelligence tools outside of the social and search domains. However, the go-to-market strategy for Realize appears to be somewhat unclear at the outset, with the product having been launched during the fourth-quarter earnings announcement without extensive pilot testing, leaving initial customer demand uncertain.
Despite these challenges, Taboola’s management is entering 2025 with a fresh product lineup and insights gained from collaborations with premium publishers like Yahoo and Apple (NASDAQ:AAPL). These learnings are expected to help the company adjust to the significantly revised expectations for the year. Zgutowicz noted that there is anticipation for further discussions on the opportunities and challenges facing Taboola, with a scheduled talk with the company’s CFO, Steve Walker, set for today at 1:30 p.m. ET.
In conclusion, while revising estimates and reducing the price target for Taboola, Benchmark reaffirms its Buy rating, indicating a continued positive outlook on the company’s stock despite the recent adjustments to its financial projections. InvestingPro’s Fair Value analysis suggests the stock is currently undervalued, with comprehensive valuation metrics and detailed financial health scores available in the Pro Research Report, part of the extensive analysis covering over 1,400 US stocks.
In other recent news, Taboola reported its fourth-quarter earnings for 2024, revealing a slight miss on earnings per share, posting $0.10 compared to the expected $0.11. Revenue also fell short of expectations, coming in at $410 million against the anticipated $476.56 million. For the full year 2024, the company achieved revenues of $1.77 billion, with a 25% increase in Ex TAC Gross Profit, reaching $667.5 million. Adjusted EBITDA grew by 104%, totaling $200.9 million, while free cash flow exceeded expectations at $149.2 million. Despite these results, analysts from B.Riley and Citizens JMP downgraded Taboola’s stock, citing a smaller-than-expected native advertising market and a significant shortfall in 2025 guidance. B.Riley adjusted the stock rating to Neutral with a reduced price target of $4.00, while Citizens JMP downgraded it to Market Perform. Taboola also announced a $200 million expansion to its stock repurchase program, reflecting confidence in its future prospects. The company launched a new performance advertising platform, "Realize," aiming to capitalize on a $55 billion market opportunity.
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