Taboola.com (TBLA – Research Report), the Communication Services sector company, was revisited by a Wall Street analyst today. Analyst Zach Cummins from B.Riley Financial downgraded the rating on the stock to a Hold and gave it a $4.00 price target.
Zach Cummins has given his Hold rating due to a combination of factors influencing Taboola.com’s current and future performance. The company reported strong fourth-quarter results for 2024, with revenue and adjusted EBITDA exceeding expectations, alongside robust free cash flow generation. However, these positive outcomes were overshadowed by the company’s guidance for fiscal year 2025, which fell short of market expectations. The projected growth in ex-traffic acquisition cost gross profit and adjusted EBITDA was significantly below prior consensus, primarily due to reduced native advertising budgets from major advertisers, particularly those transitioned from the Yahoo platform.
Despite the company’s healthy adjusted EBITDA margins and strong cash flow, the recalibration of its strategy, including the introduction of a new platform to enhance performance advertising capabilities, is expected to take several quarters to impact results. This strategic shift, coupled with the anticipated reset year in 2025, led to a downgrade from Buy to Neutral. Cummins also lowered the price target from $5 to $4, reflecting a more conservative valuation approach based on the revised earnings outlook. As a result, Cummins believes it is prudent to adopt a wait-and-see approach in the near term.