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On Monday, Susquehanna has revised its price target for Criteo S.A. (NASDAQ:CRTO), a global technology company specializing in digital marketing and advertising. The new price target has been set to $30.00, a decrease from the previous target of $38.00. Despite this change, Susquehanna is maintaining a Neutral rating on the company’s stock. According to InvestingPro data, the stock appears undervalued based on its Fair Value analysis, with analyst targets ranging from $27 to $66, and a consensus recommendation leaning towards "Buy" at 1.69 (scale 1-5).
The adjustment follows Criteo’s first-quarter earnings report, which was notably strong, with the company maintaining healthy financials including a gross profit margin of 51.8% and an impressive Piotroski Score of 9. However, the company disclosed that two significant retail media clients are planning to scale back their partnerships later in the year. This development is expected to dampen Criteo’s prospects for 2025 and the years that follow. InvestingPro analysis reveals 14 additional key insights about Criteo’s financial health and future prospects, available to subscribers.
Susquehanna’s announcement also pointed to broader economic factors affecting Criteo. The firm noted that the company is beginning to experience softer trends as a result of macroeconomic conditions. These challenges, along with the evolving market environment, have led to the decision to sustain the Neutral stance on the stock. Despite these concerns, Criteo maintains a strong financial position with more cash than debt on its balance sheet and a healthy current ratio of 1.22, suggesting robust liquidity to weather economic headwinds.
The implications of the scaled-back relationships with major clients are significant for Criteo, as the company has been striving to expand its retail media platform. The reduction in scope from these clients could impact Criteo’s revenue and growth trajectory, with analysts forecasting a 0.4% revenue decline for the current fiscal year. Nevertheless, the company maintains strong profitability with a P/E ratio of 12.05 and generates substantial free cash flow, as evidenced by its attractive free cash flow yield of 14%.
Susquehanna’s commentary on the situation was clear: "Our thoughts. CRTO reported a solid 1Q, though the announcement that two major retail media clients will reduce scope of their relationship with CRTO later this year has softened the outlook for 2025 and beyond. In addition, the company has started to see softer trends due to the macro. Given these issues and the shifting landscape, we maintain our Neutral." This statement emphasizes the cautious approach Susquehanna is taking in light of the recent developments.
In other recent news, Criteo reported first-quarter results that exceeded analyst expectations on both earnings and revenue. The company posted adjusted earnings per share of $1.10, surpassing the consensus estimate of $0.78. Revenue reached $451 million, significantly higher than the expected $259.76 million. Criteo’s Contribution ex-TAC, a key profitability metric, increased by 4% year-over-year to $264.4 million, while adjusted EBITDA rose by 30% to $92.1 million. The company also repurchased $56 million worth of shares during the first quarter and concluded the period with $286 million in cash and cash equivalents. Looking ahead, Criteo expects its Contribution ex-TAC for the second quarter to be between $272 million and $278 million and maintains its full-year 2025 outlook for low-single-digit growth in Contribution ex-TAC at constant currency. CFO Sarah Glickman expressed confidence in Criteo’s resilient business model and strong financial foundation.
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