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Are Taboola's decent first-quarter results a glimmer of hope or just a temporary boost?
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Shares of online advertising expert Taboola (TBLA +0.00%) surged higher on Wednesday, thanks to a stellar first-quarter earnings report. The stock rose as much as 38% in the early morning, settling down to a roughly 24% gain by the time markets closed.
Taboola's top-line sales fell 7.6% year over year in the quarter, landing at $330 million. On the bottom line, the company reported an adjusted net loss of $0.01 per diluted share. Analysts expected much steeper drops across the board, setting their consensus revenue estimate at $312 million while expecting a net loss of $0.06 per share.
Moreover, Taboola's first-quarter results exceeded the top end of management's guidance range thanks to a solid collection of big-ticket ad publishing deals. By the end of this reporting period, Taboola boasted more than 8,000 ad publishers and 18,000 active advertisers.
The revenue drop was smaller than the 8.9% decrease Taboola reported three months ago, ending a streak of three fiscal quarters with deeper and deeper growth cuts. Investors are breathing a sigh of relief today. This release suggests that the inflation-inspired downturn in the digital advertising market may be on the road to recovery already.
Looking ahead, Taboola recently signed an exclusive 30-year advertising partnership with Yahoo! That deal will roll out over the next few quarters, aiming for a functional completion in 2024. Investors should keep a close eye on how this potentially game-changing agreement feeds into Taboola's top and bottom lines over time.
This breath of fresh air is a welcome break from the tons of market pressure Taboola has experienced since joining the public market in the fall of 2020, but it's far from a full recovery. We're still talking about an unprofitable growth stock, whose long-term sales trend made a 7.6% revenue drop look like good news. To put this analysis in context, here's how Taboola's trailing financial figures entered this week's first-quarter update:
TBLA Revenue (TTM) data by YCharts
The stock price is down by 29% in 52 weeks, even after today's surge. While this earnings report provides a glimmer of hope for Taboola, investors should remain cautiously optimistic. The company's long-term viability still hinges on its ability to turn a profit and consistently generate revenue growth. As the digital advertising landscape evolves, serious investors will want to monitor Taboola's progress.
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