Mounting Regulatory Risks Will Limit Digital Opportunities Yet Elevate Value

Key Takeaways

• Regulatory tightening and evolving platform policies could restrict core service functionality, raising compliance costs and threatening user retention and future revenue growth.
  
• Heavy dependence on select geographies and rising competition from device makers and telecom carriers risks eroding both market share and recurring earnings.
  
• Heavy exposure to India and ad-driven revenues, combined with currency and tax headwinds, threatens earnings stability, scalability, and long-term growth prospects.

Catalysts

Develops and publishes mobile caller ID applications for individuals and business in India, the Middle East, Africa, and internationally.

• While Truecaller is benefiting from ongoing global smartphone adoption and rising concerns about digital communication security, the company faces mounting regulatory risks, particularly as data privacy laws tighten and could restrict the data necessary for its services. This may result in higher compliance costs or feature limitations, directly impacting net margins in the coming years.
  
• Although user growth remains strong, especially in emerging markets where smartphone adoption is rapidly expanding, heavy reliance on India and select geographies leaves Truecaller exposed to region-specific regulation and competition. This concentration risk could suppress sustained revenue growth if local conditions shift unfavorably.
  
• The continued launch of new enterprise solutions and AI-driven anti-fraud features positions Truecaller to capture new high-margin B2B revenue, yet intensifying competition from device makers and telecom carriers integrating native spam blocking could erode market share, potentially flattening ARPU growth and recurring earnings prospects.
  
• Despite buoyant demand for caller ID, fraud prevention, and secure business communications tied to increased digital transformation, evolving operating system policies-such as restricted API access or platform-imposed limits-might undercut the utility of Truecaller's offering, negatively impacting future user retention and ultimately top-line growth.
  
• While adoption of premium subscriptions and new ad formats could support earnings, the durability of ad-supported monetization is questionable. Consumer fatigue with advertising, potential ad-blocker usage, and stricter cross-border data regulations all threaten to dampen advertising revenues and complicate operational scalability, increasing cost pressure on the business over the long term.

Truecaller Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more pessimistic perspective on Truecaller compared to the consensus, based on a Fair Value that aligns with the bearish cohort of analysts.
• The bearish analysts are assuming Truecaller's revenue will grow by 17.7% annually over the next 3 years.
• The bearish analysts assume that profit margins will increase from 24.4% today to 28.9% in 3 years time.
• The bearish analysts expect earnings to reach SEK 942.7 million (and earnings per share of SEK 2.71) by about July 2028, up from SEK 488.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bearish analyst cohort, the company would need to trade at a PE ratio of 26.1x on those 2028 earnings, down from 36.5x today. This future PE is lower than the current PE for the SE Software industry at 36.5x.
• Analysts expect the number of shares outstanding to decline by 0.38% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.4%, as per the Simply Wall St company report.

Truecaller Future Earnings Per Share Growth

Risks

• Heavy dependence on emerging markets, especially India, exposes Truecaller to region-specific risks such as regulatory changes, geopolitical instability, and intensified competition, all of which could negatively impact revenue concentration, earnings stability, and the company's long-term growth trajectory.
  
• Volatility in foreign exchange rates, particularly the strengthening Swedish krona against the Indian rupee, continues to have a substantial negative effect on reported revenues and profitability, presenting an ongoing risk to earnings quality and predictability for the foreseeable future.
  
• Increased direct sales activity shifts more revenue to India, where effective tax rates are materially higher than in Sweden, resulting in a structural increase in the group's overall tax rate and a long-term drag on net margins.
  
• Saturation of digital advertising markets, combined with already flat ad impressions and declining ad revenue per daily active user, signals a risk that advertising growth cannot keep pace with user growth, threatening overall revenue scalability and top-line growth rates.
  
• Programmatic ad revenues continue to represent the bulk of ad income, making the company highly sensitive to fluctuations in advertiser demand and broader macroeconomic risks such as geopolitical tensions, which introduce volatility in quarterly revenues and undermine forecast accuracy for earnings.

Valuation

• The assumed bearish price target for Truecaller is SEK60.0, which represents the lowest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Truecaller's future earnings growth, profit margins and other risk factors from analysts on the more bearish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of SEK95.0, and the most bearish reporting a price target of just SEK60.0.
  
• In order for you to agree with the bearish analysts, you'd need to believe that by 2028, revenues will be SEK3.3 billion, earnings will come to SEK942.7 million, and it would be trading on a PE ratio of 26.1x, assuming you use a discount rate of 6.4%.
  
• Given the current share price of SEK51.65, the bearish analyst price target of SEK60.0 is 13.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.