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On Thursday, B.Riley analysts downgraded Taboola shares (NASDAQ:TBLA) from a Buy to a Neutral stance, adjusting the price target to $4.00, a decrease from the previous $5.00. Currently trading at $3.09, the stock sits well below the broader analyst consensus range of $5.00 to $6.00. According to InvestingPro analysis, Taboola appears undervalued based on its Fair Value estimate. This change comes amidst expectations that fiscal year 2025 will be a reset year for the company, with a longer timeline for the new platform and strategy to take effect.
The firm noted Taboola’s strong adjusted EBITDA margins and robust free cash flow generation as potential factors that could provide some downside protection for the stock. With an EBITDA of $126.8 million and a notable free cash flow yield of 14%, the company’s financial position appears solid. Additionally, the recent announcement of a $200 million expansion to the stock repurchase program was acknowledged as a positive development, aligning with InvestingPro’s observation of aggressive share buybacks by management.
However, due to the anticipated time it will take for Taboola’s recalibrated strategy and new platform to impact the business, B.Riley suggests a more cautious approach in the near term. This perspective has led the firm to revise its fiscal year 2025 estimates downward while also introducing fiscal year 2026 estimates that project mid-single-digit growth and slight improvements in adjusted EBITDA margins.
The lowered price target is based on a reduced fiscal year 2025 enterprise value to adjusted EBITDA multiple of approximately 6 times, down from the prior multiple of around 7.5 times. This adjustment reflects a tempered outlook for Taboola’s near-term performance as the company navigates its strategic transition. For deeper insights into Taboola’s valuation metrics and growth potential, investors can access comprehensive analysis through InvestingPro’s detailed research reports, which cover 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 (EPS), posting $0.10 against a forecast of $0.11. Revenue also fell short, coming in at $410 million compared to the anticipated $476.56 million. For the full year, however, Taboola achieved a revenue of $1.77 billion, with a notable 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. In another development, Citizens JMP analysts downgraded Taboola’s stock to Market Perform from Market Outperform, citing a smaller than expected market size for native advertising as a reason. Analysts noted that Taboola’s projected EBITDA for 2025 is approximately $26 million below consensus, prompting a revision of their estimates. Despite these challenges, Taboola launched a new performance advertising platform called "Realize," aiming to capitalize on a $55 billion market opportunity. The company remains focused on expanding its performance advertising capabilities and leveraging its new platform to drive future growth.
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