Please ensure Javascript is enabled for purposes of website accessibility

Why Criteo Stock Is Skyrocketing Today

By Anders Bylund – Nov 3, 2021 at 1:40PM

Key Points

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The manager of digital marketing programs crushed Wall Street's targets in the third quarter.

What happened

Digital marketing expert Criteo (CRTO 0.13%) reported fantastic third-quarter results on Wednesday morning, sending shares as much as 32.3% higher. By 12:25 p.m. EDT, the stock had cooled down slightly to a gain of 28.4%.

So what

Criteo's sales after subtracting traffic acquisition costs (ex-TAC revenue) rose 13% year over year in the third quarter to $211 million. Your average analyst would have settled for $205 million. On the bottom line, adjusted earnings increased by 60% to $0.64 per diluted share. Here, the analyst consensus called for earnings of $0.36 per share.

The company added more than 400 net new clients during the quarter, bringing its total to 22,000 customers. The media spending under Criteo's management stopped at $615 million, 23% above the year-ago period's reading as measured in constant currencies. Sales were flat in the Americas but Criteo's business is booming in the Asia-Pacific and Europe, Middle East, and Africa (EMEA) regions.

A red charting arrow bouncing skyward off a black trampoline.

Criteo's shares bounced back today from recent losses. Image source: Getty Images.

Now what

This impressive pop is a welcome change from the negativity that has surrounded Criteo in recent months. The stock is still trading 15% below the 52-week highs of June and July as investors worry about the impact of the advertising technology changes in Apple's iOS and Alphabet's Chrome platforms. Criteo's management is less concerned with these technical challenges because the company saw them coming a mile away.

"We've been working on alternative solutions to iOS and Chrome for over two years and are confident in our position today," said CEO Megan Clarken in this morning's earnings call. "We started our transformation journey years ago and believe we're ahead in the race to drive superior performance and environments deprived of third-party identifiers."

And the beat goes on. This report extends a long streak of positive earnings and revenue surprises, and it's easy to make the argument that analysts generally underestimate this company. The financial results certainly support Clarken's rosy analysis and investors are embracing the stock today.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund owns shares of Alphabet (A shares) and Criteo. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Apple. The Motley Fool recommends Criteo and recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.