What happened
Shares of ad-tech company Criteo (CRTO +0.38%) are surging for the second day in a row. Yesterday, the company delivered an encouraging earnings report and takeover speculation started to swirl. Today, Wall Street analysts are chiming in with their positive two cents, so the stock keeps climbing. As of 1 p.m. EST, Criteo stock was up 6%, but it had been up almost 15% earlier in the session.
So what
Criteo's revenue has been going backwards for a while now, and some investors feared the company was headed for a slow death due to changes made in internet privacy protocols (specifically with third-party browser cookies) -- something ad-tech companies like Criteo have historically relied on. But the key takeaway from its recently reported fourth quarter is it's successfully navigating these industry changes.
Image source: Getty Images.
Because it's adjusting to a new way of doing business, Criteo is guiding for modest single-digit revenue growth in 2021, stopping its streak of declines. But keep in mind that Criteo was still a profitable business with a solid balance sheet even throughout the recent challenging years. Therefore, now that it's returning to growth, its financial prospects are even better and management is more comfortable to start rewarding shareholders. With its Q4 report, Criteo authorized a $100 million buyback plan.
Now what
Criteo has been trading in bargain territory for a while, due to its seemingly poor prospects. But analysts are reversing their outlooks to the upside today. Multiple analysts raised their price targets for Criteo stock because it is so cheap at less than 20 times forward earnings estimates. Furthermore, Bloomberg is reporting that the company is even garnering some interest as an acquisition target.
All in all, it was a good quarter and better forward guidance for Criteo. However, long-term investors need to remember that a single good quarter isn't what we're looking for. It's a positive first step, but the company will need to continue to make progress in its turnaround to reward shareholders over a longer time period.
