Can Taboola's Israeli Revenue Exposure Weigh On Earnings Results This Season? This Analyst Answers

Benchmark analyst Mark Zgutowicz reiterated the Buy rating on Taboola.Com Ltd. TBLA, with a price target of $6.

Taboola will release its Q3 results tomorrow, November 8, before the market opens.

During the quarterly result, the analyst said he would particularly wait for an update on the pace of Yahoo! advertiser migration, improved core platform yield visibility NTM (e.g., advanced conversions), near-to medium-term expectations for commerce-driven revenue incrementality (e.g., Turnkey Commerce), and financial impact from the Middle East conflict, noting ~15% of revenue is from Israel. 

Although TBLA's Israeli revenue exposure is well ascertained (~15% of the total in 2Q), Zgutowicz added that he would gain insight into customer concentration and understand the financial impact of likely regional ad campaign pauses.

The analyst sees 4QE guidance to meaningfully reflect this uncertainty.

Importantly, the company has long had remediation efforts in place, including data centers in the U.S., Germany, Hong Kong, Singapore, and the Netherlands, including 10 data centers under collocation agreements with 7 data center providers. 

The analyst said he also looks for an update on the present mix of its significant (undisclosed) headcount in Israel subject to military enlistment. 

Positive commentary surrounding NTM core yield improvement despite 3QE's revenue ex-TAC margin (sequential) decline is expected, according to the analyst.

Following 2Q's step-function revenue exTAC growth (+35% Q/Q), 3Q growth (albeit less significant) will be proof of continued momentum for its Dynamic Creative Optimization (DCO) product and subsequent Connexity-related revenue synergies, the analyst adds.

For the quarter to be reported, the analyst expects revenues of $338.4 million, with EBITDA of $(16.4) million.

Price Action: TBLA shares are trading lower by 5.32% to $3.54 on the last check Tuesday.