Last Update 12 Nov 25
Fair value Decreased 39%TEAD: Near-Term Challenges Will Ease as Integration Progresses for Future Stability
Teads Holding's analyst price target was recently reduced from $2.50 to $1. Analysts cite ongoing operational challenges and weaker-than-expected financial results as the main drivers for the downward revision.
Analyst Commentary
Recent analyst reports reflect a shift in sentiment regarding Teads Holding following its latest financial results and ongoing integration challenges. The range of commentary highlights both cautious views and potential opportunities for the company's future performance.
Bullish Takeaways- Bullish analysts note that despite the reduction in price targets, maintaining a Neutral rating suggests confidence that the downside may be limited at current valuation levels.
- Some believe that once operational difficulties are addressed, the merged entity could benefit from broader reach and operational scale. This could potentially support long-term growth.
- There is an expectation that stabilization of revenue trends may eventually create a more predictable outlook for investors.
- Bearish analysts highlight that the firm's recent quarterly results missed expectations, underlining near-term execution challenges.
- Concerns remain about the significant difficulties in integrating Teads and Outbrain. These difficulties could continue to weigh on overall performance.
- Uncertainty around when revenue trends will stabilize creates additional risk for valuation and investment.
- The downgrade to a lower performance rating reflects skepticism about the company's ability to deliver growth in the short term.
What's in the News
- Teads launched the beta of CTV Performance, a solution for connected TV campaigns that tracks site visits, leads, and sales, offering advertisers measurable impact and confident attribution through the Universal Pixel (Key Developments).
- The company's CTV Performance product enabled Men's Wearhouse to connect awareness with performance, resulting in over 41,000 site visits and more than 50,000 incremental store visits during a recent campaign (Key Developments).
- Results from Teads' CTV HomeScreen study, conducted with MediaMento Institute, showed that HomeScreen ads drive 29% faster attention capture and significantly higher engagement than skippable pre-rolls. Unaided recall reached as high as 50% and aided recall peaked at 84% (Key Developments).
- More than 1,500 CTV HomeScreen campaigns have been activated globally for premium brands such as Cartier, Nestle, and Air France. Highlights include Cartier's 3D campaign garnering over 12 million impressions and Air France achieving a 22% increase in recommendation intent (Key Developments).
- Teads Holding was recently removed from the S&P Global BMI Index (Key Developments).
Valuation Changes
- The Fair Value Estimate has decreased significantly, dropping from $3.02 to $1.85 per share.
- The Discount Rate has increased slightly from 12.32% to 12.5%.
- The Revenue Growth Projection has declined from 12.16% to 8.99%.
- The Net Profit Margin Estimate has fallen from 10.80% to 9.68%.
- The Future Price-to-Earnings (P/E) Ratio has decreased from 2.99x to 2.06x.
Key Takeaways
- The merger with Teads enhances Outbrain's capabilities in video and branding, potentially driving top-line growth through expanded advertiser spending.
- AI-based creative automation and DSP expansion enhance advertising effectiveness, targeting new customer segments, and boosting revenue and net margins.
- Integration risks from Teads acquisition, revenue decline, and increased expenses may suppress earnings amid questioning of the native advertising market's growth potential.
Catalysts
About Outbrain- Operates a technology platform that connects media owners and advertisers with engaged audiences to drive business outcomes worldwide.
- The merger with Teads brings together Outbrain's performance capabilities with Teads' expertise in video and branding, creating a comprehensive solution for advertisers. This combined offering is expected to drive increased revenue from expanded advertiser spending across formats such as video and native advertising, enhancing the company's top-line growth.
- The integration of Outbrain and Teads aims to capture $65 million to $75 million in synergies by 2026, with significant cost savings and potential cost synergies from traffic acquisition strategies, likely improving net margins.
- The expansion of Outbrain's DSP capabilities, which saw a 45% increase in advertiser spend in 2024, targets the growing demand for performance marketing solutions, potentially boosting revenue and enhancing earnings from new customer segments.
- Launching 'Moments,' a vertical video experience for the Open Internet, provides a new revenue stream, attracting premium brands and providing advertisers with engaging content solutions, thereby increasing revenue potential.
- The integration of AI-based creative automation is expected to enhance advertising effectiveness and efficiency, likely leading to better ad performance and improved net margins as advertisers achieve higher returns on ad spend with targeted creatives.
Outbrain Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Outbrain's revenue will grow by 19.2% annually over the next 3 years.
- Analysts assume that profit margins will increase from -0.1% today to 9.7% in 3 years time.
- Analysts expect earnings to reach $146.8 million (and earnings per share of $1.79) by about May 2028, up from $-711.0 thousand today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 5.8x on those 2028 earnings, up from -488.9x today. This future PE is lower than the current PE for the US Interactive Media and Services industry at 16.9x.
- Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.49%, as per the Simply Wall St company report.
Outbrain Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The recent acquisition of Teads introduces risks related to integration and synergy realization, which could lead to increased short-term operational disruptions and impact revenue growth and net margins.
- Revenue in Q4 decreased by 5% year-over-year, and there was a significant impact due to a key partner transitioning to new bidding technology, which could lead to ongoing revenue volatility and pressure on earnings.
- The net revenue retention rate of publishers was only 86%, highlighting potential risks in maintaining current client relationships and future revenue streams.
- The market for native advertising is facing scrutiny regarding its total addressable market (TAM), which could constrain future growth potential and adversely affect revenue projections.
- Operating expenses have increased, driven by transaction-related costs, which could suppress net margins and reduce earnings despite anticipated synergies and cost-saving measures.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $5.95 for Outbrain based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $10.0, and the most bearish reporting a price target of just $4.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.5 billion, earnings will come to $146.8 million, and it would be trading on a PE ratio of 5.8x, assuming you use a discount rate of 7.5%.
- Given the current share price of $3.7, the analyst price target of $5.95 is 37.8% 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.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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