- Needham analyst Laura Martin reiterates Taboola.Com Ltd TBLA with a Buy and a $5 price target.
- TBLA's strategy of trying to become a "must-buy" for performance-based advertisers in the Open Internet, just as The Trade Desk, Inc TTD has become an Open Internet "must-buy" for ad agency brands, won the analyst's attention.
- Typically, performance advertisers bid based on CPC (cost per click) rather than CPM (cost per thousand) and do not use ad agencies.
- TBLA believes that the Walled Gardens of Alphabet Inc GOOGL Google and Meta Platforms Inc META were successful in the mobile era primarily because they offered a 1-stop shop for digital advertisers for Search and Social, respectively.
- These two companies became "must buy" for digital advertisers, and many advertisers did not diversify away from these two properties on mobile devices, TBLA believes.
- Martin appreciates TBLA's end-to-end control of both content and ad units.
- Unlike TTD, which can only bid on standardized ad units, TBLA controls its content and ads through its captive DSP and SSP.
- This end-to-end control allows TBLA much more flexibility to create and serve customized ad units for the screen and each consumer.
- Historically, TBLA has created and served vertical ads, oversized ads, e-commerce lists, and other rare ad units on the Open Internet, attaining more flexibility to meet advertisers' needs than TTD or other Open Internet competitors that don't control 100% of both the content feed and the ad units.
- Martin also highlighted TBLA's pace of product innovation.
- Both the small and large product innovations at TBLA, many of which drove upside to revenue growth, impressed the analyst.
- Martin estimates that TBLA introduces about one considerable product innovation a year.
- Each new product attracts new advertisers and drives revenue upside.
- TBLA usually innovates products based on client requests, which lowers the risk of wasted R&D spending.
- The Yahoo integration is the next (big) step. Since the analyst expects TBLA costs to rise in FY23 as it integrates its huge 30-year YHOO deal, which should nearly double TBLA's size by December 31, 2024, Martin worries that ROICs will fall in FY23 and then rise in 2024.
- Price Action: TBLA shares traded lower by 2.80% at $2.61 on the last check Wednesday.
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