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On Tuesday, Jefferies analyst James Heaney resumed coverage on Outbrain Inc (NASDAQ:OB), issuing a Hold rating on the stock with a price target of $5.50. The new price target suggests a valuation based on 4.5 times the company’s expected 2026 earnings before interest, taxes, depreciation, and amortization (EBITDA). According to InvestingPro data, the stock currently trades at $4.73, having declined over 31% year-to-date, though it maintains a positive 30.93% return over the past year.
In his report, Heaney acknowledged the potential benefits stemming from the combination of Outbrain and Teads, highlighting a more robust product offering for both brand and direct response advertising. He pointed out the clear path to cost synergies and the promising cross-selling opportunities due to the overlap of supply partners between the two entities. InvestingPro analysis shows the company maintains strong financial health with more cash than debt on its balance sheet and a healthy current ratio of 1.19, providing a solid foundation for the merger integration.
Despite these positive aspects, Heaney expressed caution regarding the advertising market on the open internet. He noted the deal structure between Outbrain and Teads and the soft fourth-quarter advertising performance from Teads as additional sources of risk. As a result, he recommends maintaining a Hold position on Outbrain shares until there is more evidence of successful combined execution from the merged companies. Looking ahead, InvestingPro data indicates analysts expect significant revenue growth of 71% for FY2025, suggesting potential upside from current levels. For deeper insights into Outbrain’s valuation and growth prospects, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
Outbrain, which specializes in providing a content discovery platform on the open internet, recently combined forces with Teads, known for its global media platform. The merger is intended to create synergy between Outbrain’s and Teads’ complementary services, potentially leading to enhanced market offerings and improved financial performance. The company’s current Fair Value assessment from InvestingPro suggests the stock may be undervalued at current levels.
Investors and market watchers will be keeping a close eye on Outbrain’s progress in the coming months, as the company strives to capitalize on the opportunities and navigate the challenges outlined by Jefferies. The Hold rating and $5.50 price target will serve as benchmarks for evaluating Outbrain’s performance as it integrates Teads and attempts to prove the merits of the merger to the market.
In other recent news, Outbrain Inc. reported its fourth-quarter 2024 earnings, which revealed a notable shortfall in both earnings per share (EPS) and revenue compared to projections. The company posted an EPS of $0.07, falling short of the expected $0.13, and reported revenue of $234.6 million, below the forecasted $260.61 million. Despite the revenue decline, Outbrain achieved a 21% year-over-year increase in Adjusted EBITDA, indicating improved operational efficiency. The company also completed the acquisition of Teads, which is anticipated to enhance future performance through synergies. Outbrain has set a Q1 2025 Ex-TAC Gross Profit guidance of $100-$105 million and an Adjusted EBITDA guidance of $8-$12 million. Analyst feedback from firms like Jefferies LLC reflects cautious optimism, with a focus on the integration of platforms and potential revenue synergies. The company also plans to operate under the Teads brand moving forward, signaling a strategic shift in its market approach.
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