On Friday, Needham, a notable investment firm, adjusted its financial outlook for Taboola (NASDAQ:TBLA) shares, a leading discovery platform. The firm's analyst revised the 12-month price target down to $5.00 from the previous target of $6.00, while maintaining a Buy rating on the stock.
The revision comes after a reassessment of the time it may take for Taboola to integrate Yahoo's demand side into their system, which is now expected to be longer than initially anticipated.
Despite this adjustment, Needham stands by its second-quarter projections for Taboola, expecting Gross Revenue to reach $428.3 million, marking a 29% year-over-year increase.
Net Revenue, excluding Traffic Acquisition Costs (TAC), is anticipated to be $145.6 million, up 18% year-over-year, with Adjusted EBITDA at $27.2 million, a significant 74% increase from the previous year, resulting in a 19% margin.
For the full fiscal year 2024, Needham has slightly reduced its expectations. The firm now forecasts Net Revenue, ex TAC, to be $655 million, which is a 22% increase year-over-year but 2% below their earlier estimates. Adjusted EBITDA for the year is projected to rise by 85% year-over-year to $183 million, though this is 10% below previous estimates, with a margin of 28%.
As a consequence of the revised forecasts for FY24, Needham also adjusted its revenue and EPS estimates for fiscal year 2025. This recalibration is reflected in the new 12-month price target for Taboola's shares, which has been lowered to $5.
The reduced price target is directly tied to the updated revenue and earnings projections, which take into account the potentially extended timeline for the integration process.
In other recent news, Taboola has reported a strong Q1 performance for 2024, with substantial year-over-year growth in revenue, adjusted EBITDA, and free cash flow. The company's revenue increased by 26%, reaching approximately $414 million, and adjusted EBITDA grew over 100%, totaling $23.5 million.
Free cash flow also more than doubled from the previous year, nearing $27 million. However, a net loss of $26.2 million was reported, alongside non-GAAP net income of $3.8 million.
In addition, Taboola launched a new premium ad offering, Taboola Select, for large brands and agencies, and is expanding its partnership with Yahoo. The company's e-commerce business is growing faster than other segments, and Taboola anticipates improved adjusted EBITDA margins in the latter half of the year.
For Q2 2024, the company expects revenue to be between $410 million and $440 million, with adjusted EBITDA between $20 million and $30 million. Taboola ended Q1 with a net cash position of $35.5 million after repurchasing $28 million of shares. These are recent developments that reflect the company's robust financial health and its optimistic outlook for 2024.
InvestingPro Insights
In light of Needham's adjusted financial outlook for Taboola, real-time data and InvestingPro Tips provide additional context for investors considering the stock. Taboola's management has shown confidence in the company's future by aggressively buying back shares, a move that often signals a belief in undervalued stock price. Additionally, the company is expected to experience sales growth in the current year, with analysts anticipating net income growth as well. This aligns with Needham's projection of a significant year-over-year increase in Gross and Net Revenue for Taboola.
From a financial metrics standpoint, Taboola's market capitalization stands at approximately $1.17 billion USD. While the company operates with a moderate level of debt and liquid assets exceed short-term obligations, it is currently trading at a high EBITDA valuation multiple. Moreover, Taboola does not pay a dividend to shareholders, which could be a consideration for income-focused investors.
For those seeking a deeper dive into Taboola's financial health and future prospects, there are additional InvestingPro Tips available. These tips can shed light on factors such as earnings revisions by analysts and the company's profitability outlook. To explore these insights and more, visit https://www.investing.com/pro/TBLA. Plus, use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of investment data and analysis to inform your decisions.
It's worth noting that among the 11 additional InvestingPro Tips available, two analysts have revised their earnings downwards for the upcoming period, and the company has not been profitable over the last twelve months. However, analysts predict the company will be profitable this year, which could indicate a turning point for Taboola. These factors, combined with the real-time data provided, can help investors make more informed decisions in the context of the current market environment.
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