On Tuesday, BMO Capital Markets sustained its positive stance on Criteo S.A. (NASDAQ:CRTO), maintaining an Outperform rating with a $48.00 price target. The firm's analyst highlighted Criteo's recent investor update, which emphasized the substantial Retail Media opportunity ahead. According to the update, Criteo aims to tap into a $50 billion Serviceable Addressable Market (SAM).
Criteo's current partners, the analyst noted, earn approximately $0.80 in advertising revenue for every $100 of Gross Merchandise Value (GMV), compared to Amazon (NASDAQ:AMZN)'s roughly $5.00. This gap underscores a significant opportunity for Criteo to expand within its existing customer base. The analyst pointed out that while Criteo's mid-teen take rates are expected to remain stable in the near term, they could decrease as the company scales up.
The reaffirmation of the Outperform rating reflects the analyst's view that Criteo's stock is attractively valued at approximately 5.5 times its forecasted fiscal year 2025 Adjusted EBITDA. This valuation is below the 10-year average multiple of 6.5 times. The analyst has chosen to maintain the current estimates and target price for Criteo, based on the company's potential for meaningful long-term growth in the Retail Media sector.
In other recent news, Criteo has seen significant developments in its financial performance and leadership changes. The company reported strong Q3 2024 results, with revenues reaching $459 million and a 9% year-over-year growth in Contribution ex-TAC at constant currency. Retail Media revenue increased by 23%, hitting $61 million, while Performance Media grew by 5%. Criteo also doubled its brand count to 3,100 and activated media spend to $1.5 billion over the past two years.
However, BMO Capital Markets and DA Davidson have revised their price targets for Criteo. BMO Capital Markets reduced its target to $48, maintaining an Outperform rating, while DA Davidson lowered its target to $53 but continued to endorse a Buy rating. These revisions are due to slight underperformance and lower than expected revenues, respectively.
Criteo's CEO, Megan Clarken, has announced her upcoming retirement, yet remains confident in the company's growth strategy, which includes AI-driven performance and expanding partnerships, such as with Microsoft (NASDAQ:MSFT) Advertising. Despite a 16% decline in Criteo's AdTech services due to reliance on one client, the company projects a 10%-11% growth in Contribution ex-TAC for 2024, with an adjusted EBITDA margin projected at 32%-33%.
InvestingPro Insights
To complement BMO Capital Markets' positive outlook on Criteo S.A. (NASDAQ:CRTO), recent data from InvestingPro offers additional perspective on the company's financial health and market performance. Despite the analyst's optimism about Criteo's Retail Media opportunity, InvestingPro data shows that the stock has faced some short-term challenges, with a 25.18% price decline over the past three months and a 14.75% drop in the last month.
However, aligning with the analyst's view on attractive valuation, Criteo's P/E ratio stands at 20.52, with an adjusted P/E of 17.79 for the last twelve months as of Q3 2024. This relatively modest valuation is coupled with a strong financial position, as highlighted by two key InvestingPro Tips: Criteo holds more cash than debt on its balance sheet, and its liquid assets exceed short-term obligations. These factors support the company's ability to invest in growth opportunities within the Retail Media sector.
Furthermore, an InvestingPro Tip indicates that management has been aggressively buying back shares, which could signal confidence in the company's future prospects and potentially support stock value. For investors seeking more comprehensive analysis, InvestingPro offers 14 additional tips for Criteo, providing a deeper understanding of the company's financial position and market dynamics.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.