Taboola To Double Revenues After Yahoo Integration: Analyst's Positive Outlook For 2024 And 2025

Needham analyst Laura Martin reiterates Taboola.com Ltd TBLA with a Buy and a $5 price target.

The analyst hosted investor meetings for TBLA Wednesday. 

Investor sentiment has favored TBLA as it integrates Yahoo's enormous new ad units and new buy-side clients. Post-integration, Yahoo nearly doubles TBLA's revenues (from $1.5 billion to $2.5 billion), beginning in 3Q24.

After two years of weakness, Microsoft Corp MSFT revenues have stopped falling, and there is revenue upside from here, TBLA believes. TBLA's header bidding tool is working well, which should drive more revenues from MSFT & others.

The Yahoo integration is on track to begin generating revenues in 4Q23 till June 30, 2024. TBLA expects its EBITDA Margins to rise after the Yahoo integration is complete. 

TBLA's Financial Targets are for 20%+ revenue growth, a 30%+ EBITDA margin, and a 50% FCF conversion rate from EBITDA. Martin expects TBLA to over-deliver these targets in 2024 and 2025. 

Digital markets have winner-take-most economics. TBLA notes that it has never won or lost a deal to The Trade Desk, Inc TTD, implying their different marketplaces. 

TBLA has been using deep learning AI and machine learning AI for the past five years. 

TBLA believes that generative AI can automatically create personalized landing pages and become a powerful upside revenue driver.

In 2022, 75% of TBLA's revenues came from its core recommendation business (CPC & performance-based), 15% from e-commerce, 10% from video, and 5% from Taboola News. 

TBLA believes its new client wins will accelerate after the Yahoo integration because scale and data are valuable, and TBLA will have nearly 2x more revenues.

TBLA has direct deals (i.e., signed contracts) with 18,000 advertisers, representing 90% of TBLA's 2022 core revenues. Additionally, TBLA's supply-side clients sign exclusive 5-year deals with TBLA. 

TBLA's direct relationships imply that its platform is already supply-path optimized at its 35% take rate.

Digital markets have winners take most economics. 

After integrating Yahoo, TBLA's $3 billion gross revenues will be second only to TTD's $8 billion, accelerating new client wins and driving faster revenue growth for TBLA.

Price Action: TBLA shares traded lower by 1.08% at $3.20 on the last check Thursday.