Shares of Criteo (CRTO +0.72%) fell 12% on Thursday after the ad-retargeting specialist announced strong third-quarter 2023 results, but followed with cautious forward guidance.
On the former, Criteo's quarterly revenue contribution excluding traffic acquisition costs (ex-TAC) grew 15% year over year, to $245 million, translating to a 34% increase in adjusted non-GAAP (generally accepted accounting principles) earnings per share to $0.71. Analysts, on average, were only expecting earnings of $0.60 per share on revenue ex-TAC of $240.4 million.
NASDAQ: CRTO
Key Data Points
On Criteo's solid quarter, retail media strength
Criteo saw particular strength in retail media, where revenue ex-TAC climbed 29% at constant-currency, and same-retailer revenue ex-TAC retention arrived at a solid 123% -- meaning existing customers spent an average of 23% more on Criteo's platform after their first year.
"We continue to pivot our business toward areas of high growth, which represented more than half of our business for the first time ever this quarter," added Criteo CEO Megan Clarken. "We have built the only unified, AI-driven platform that directly connects advertisers with retailers and publishers to drive commerce on retailers' sites and the open internet, which, we believe, will drive long-term shareholder value."
What's next for Criteo stock?
For the fourth quarter of 2023, however, Criteo expects revenue ex-TAC of between $296 million to $302 million, for year-over-year growth of 5% to 7%, including contributions from its recent acquisition of Iponweb last year. Most analysts were modeling higher fourth-quarter revenue ex-TAC of $316 million.
For the full year 2023, Criteo expects contribution ex-TAC growth of 9% to 10% at constant currency -- effectively clarifying its previous outlook for high-single-digit to low-double-digit percent growth. Criteo also modestly lowered its outlook for 2023 adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) margin to be 27% to 28% (compared to 28% previously).
During the subsequent conference call, management explained they're exercising caution in their guidance, given current macroeconomic and geopolitical uncertainty.
That's fair enough -- though today's share price drop indicates the market obviously isn't pleased with that uncertainty. For now, until visibility improves and as long as macro challenges remain, I think the stock will remain under pressure. As such, I'm personally content watching Criteo's story unfold from the sidelines.
