What happened
Shares of advertising technology (adtech) company Taboola (TBLA -0.24%) skyrocketed on Wednesday after reporting financial results for the second quarter of 2022. Management enthusiastically declared that Q2 results "beat...across all metrics." And that's why Taboola stock was up 22% as of noon ET.
So what
Taboola is an adtech company. If you're a news publisher, you might allow Taboola to place its branded ads at the end of relevant articles.
After its first-quarter report, Taboola's management guided for Q2 revenue of $325 million to $345 million. In Q2, the company generated revenue of $343 million, which was within guidance (even though management said everything beat guidance). But this was more than what analysts were expecting.
When it comes to items like gross profit and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), Taboola's Q2 results indeed surpassed guidance. Management had guided for gross profit of $114 million and adjusted EBITDA of $28 million -- both on the high end of guidance. But in Q2, it had a gross profit of $116.4 million and adjusted EBITDA of $34.2 million.
In his letter to shareholders, founder and CEO Adam Singolda said, "Despite some challenging macro economic factors that are having an impact on our business, I am happy that our fundamentals are strong." And to his point, it's indeed been a challenging few months for adtech stocks. Therefore, Taboola's positive Q2 results understandably relieved shareholders.
Now what
One disappointing trend to monitor is Taboola's lowered guidance. For 2022, it lowered its revenue guidance to $1,434 million to $1,474 million. This is a decrease from its guidance of $1,499 million to $1,539 million last quarter and down from $1,666 million to $1,678 million at the end of 2021.
However, to be fair, Taboola went public via a special purpose acquisition company (SPAC). Many SPACs gave investors lofty projections only to withdraw guidance once they went public. However, in Taboola's case, its latest full-year revenue guidance is simply back to what it told investors in January 2021. Back then, it projected $1,450 million in revenue in 2022, within the latest guidance range.
In other words, it seems Taboola prematurely raised its initial guidance only to come back down now to what it originally expected. For now, this is a notch above other SPACs that abandoned initial, unrealistic guidance altogether. And for what it's worth, if the company hits its new guidance, it would be good for roughly 5% year-over-year growth. Considering its cheap valuation, that could be enough growth to cause the market to give this discarded stock a second look.
