Taboola stock rating cut to Market Perform by Citizens JMP

On Thursday, Citizens JMP analysts downgraded Taboola stock (NASDAQ:TBLA) to Market Perform from its previous Market Outperform rating. The decision follows the company’s recent admission that its primary market in native advertising is smaller than previously estimated. This revelation has led to a 2025 guidance that is significantly below the expectations of Wall Street. The stock has fallen over 17% in the past week, though InvestingPro analysis suggests the company is currently trading below its Fair Value, with analyst targets ranging from $5 to $6.

The downgrade was accompanied by an analysis of the company’s financial performance. In the fourth quarter of 2024, Taboola’s gross profit excluding Traffic Acquisition Costs (TAC) was reported to be 1% below the estimate provided by Citizens JMP and at the lower end of the company’s own guidance. The company’s EBITDA reached $126.84 million, slightly exceeding consensus, while maintaining strong revenue of $1.77 billion with a gross profit margin of 30.25%.

For the first quarter of 2025, Taboola’s EBITDA was approximately $10 million, or 29%, below the consensus. Furthermore, the projected EBITDA for the year 2025 showed a shortfall of around $26 million, which is 11% below the consensus. These figures have prompted the analysts at Citizens JMP to significantly reduce their estimates for the company. According to InvestingPro data, which offers 13 additional investment tips for Taboola, technical indicators suggest the stock is currently in oversold territory.

The analyst’s statement highlighted the reasons for the downgrade, noting the discrepancy between the company’s expectations and the reality of the market size for its core business of native ads. The lowered guidance for 2025 was a critical factor in this reassessment.

Taboola has not publicly responded to the downgrade at the time of reporting. The company’s stock performance following this news will be closely watched by investors and industry observers alike.

In other recent news, Taboola reported its fourth-quarter earnings for 2024, revealing a miss on both earnings per share (EPS) and revenue compared to market expectations. The company posted an EPS of $0.10, falling short of the $0.11 forecast, and reported revenue of $410 million, which was below the anticipated $476.56 million. Despite this quarterly shortfall, Taboola’s annual performance showed strength with revenues reaching $1.77 billion and a 25% increase in Ex TAC Gross Profit to $667.5 million. Adjusted EBITDA for the year grew by 104% to $200.9 million, and free cash flow exceeded expectations, reaching $149.2 million.

In a strategic move, Taboola launched a new performance advertising platform named "Realize" to capitalize on a $55 billion market opportunity. The company is also expanding its share repurchase program with an additional $200 million authorization. Looking forward, Taboola has set its 2025 revenue guidance between $1.84 billion and $1.89 billion. Despite conservative guidance, the company aims to return to double-digit growth, driven by investments in AI and first-party data. Analyst firms have not provided any new upgrades or downgrades following these announcements.

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