In a report released today, Andrew Boone from JMP Securities maintained a Buy rating on Outbrain (OB – Research Report), with a price target of $7.00.
Andrew Boone has given his Buy rating due to a combination of factors that demonstrate Outbrain’s solid performance and potential for future growth. Boone notes that Outbrain’s first-quarter earnings exceeded expectations, with ex-TAC gross profit marginally surpassing consensus and EBITDA outperforming guidance by $400,000. The company’s guidance for the second quarter aligns with current estimates, and its commitment to its 2024 goals leaves Boone’s financial model largely unchanged. He also observes that Outbrain is strategically shifting its focus toward brands and agencies, a move likely to enhance the platform’s quality—a significant development since the testing of the Quality Rating in its algorithm three years prior. With Microsoft-related headwinds easing, Boone sees positive signs in Zemanta’s increased growth and the Onyx tool’s success in attracting more comprehensive advertising budgets, reinforcing his confidence in Outbrain’s ability to achieve double-digit ex-TAC gross profit growth by 2025.
Moreover, Boone acknowledges Outbrain’s consistent drive for innovation and efficiency, such as the accelerated growth of spend on Zemanta and the deployment of Onyx, which has started to generate substantial revenue and facilitate full-funnel marketing strategies with brands and agencies. The increased adoption of AI Creative Tools, which has seen a significant rise in use among advertisers, is also highlighted as a key factor that should continue to drive yield growth. On the financial front, Outbrain has shown a strong commitment to cost discipline, with EBITDA margins expanding year-over-year and the effective use of AI automation, which has led to internal efficiencies, particularly within the small and medium publisher team. These financial and strategic initiatives underpin Boone’s positive outlook on Outbrain and justify the Buy rating for the company’s stock.
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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.
