Ygal Arounian, an analyst from Citi, reiterated the Hold rating on Outbrain (OB – Research Report). The associated price target is $5.00.
Ygal Arounian has given his Hold rating due to a combination of factors impacting Outbrain’s performance and outlook. Although Outbrain reported solid first-quarter results for 2024, with financials generally meeting expectations and a slight outperformance in adjusted EBITDA, there remain challenges that tempered the more optimistic elements of the report. The company’s growth is being hampered by a significant headwind from a large supply partner, which is affecting the guidance for the second quarter and could extend into the third quarter. While the underlying trends are improving, with increased click-through rates and significant ad spend growth in their Demand-Side Platform, Arounian exercises caution with regards to the expected acceleration in growth during the second half of the year.
Despite these concerns, there are positive signs, such as the growth in ad spend from large brands and agencies, which are crucial for reaching Outbrain’s growth forecasts for 2024 and 2025. Yet, the lower-than-expected growth guidance for the second quarter due to the aforementioned supply partner issue leads to a conservative stance. Although the valuation appears attractive at approximately 3 times the firm’s estimated 2025 EBITDA, Arounian prefers to wait for clearer indications of growth in the latter half of the year before altering his rating. This cautious approach reflects the need for better visibility on how Outbrain will navigate and overcome the current challenges.
In another report released on May 10, B.Riley Financial also maintained a Hold rating on the stock with a $5.00 price target.
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Outbrain (OB) Company Description:
Outbrain Inc is a platform powering the open web that matches audiences with personalized content and ads, driving quality engagement. Its platform delivers ads to end-users that appear as links to articles, products, and videos on media partners’ sites. It derives revenue primarily from advertisers through user engagement with the ads that it places on media partners’ web pages and mobile applications. The company generates the vast majority of its revenues from Europe, the Middle East, and Africa followed by the USA and others.
