Investors willing to gain exposure to penny stocks can use TipRanks’ penny stock screener tool to select the ones that are expected to do well in the long run. Using the tool, we found a potential long-term winner, Outbrain (NASDAQ:OB), which operates an open-source web recommendation platform.
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Outbrain’s platform is used to deliver advertisements to end-users that appear as links to articles, products, and videos on clients’ (website owners) sites. A majority of Outbrain’s revenue is generated from Europe, the Middle East, and Africa, followed by the USA and others.
Outbrain is Poised for Long-Term Growth, Says Analyst
Outbrain operates in the Adtech space, which has only one competitor and thus has the potential to earn a higher market share and command higher pricing. Also, OB’s comparatively lower take rate of about 25% of total advertisement revenue from clients’ websites makes it a compelling partner for clients.
Further, Outbrain has a low client churn and high barriers to exit as OB controls 100% of the content on its client’s websites.
Needham analyst Laura Martin is highly optimistic about AdTech companies like Outbrain, which operate “open internet” advertising platforms as opposed to the “Walled Gardens” operated by Alphabet (GOOGL) (GOOG) and Meta Platforms (META).
Martin is particularly encouraged by OB’s upward shift in the value chain. Moreover, the launch of its new product, Keystone in September will be highly valuable to OB’s large clients. Adding Keystone will provide a more holistic business optimization technology, thus adding a new Software-as-a-Service (SaaS) revenue stream and expanding OB’s total addressable market (TAM).
Furthermore, OB is also adding video units to its offerings, which will further boost website clicks and revenue. Also, Martin likes the fact that currently about 60% of total European revenue is contributed by high-quality brands and advertising agencies, which will continue in the long run.
Remarkably, Martin likes the revenue potential from political advertising for Outbrain. In Q4, OB is expected to generate higher revenue from this segment as it controls 100% of advertisements sold on CNN, Fox, Washington Post & NY Post websites.
Martin had appreciated Outbrain’s higher exposure to offshore revenue of about 60%, which suggests “a robust long-term growth runway.”
Is OB Stock a Buy?
On TipRanks, OB stock commands a Strong Buy consensus rating based on four Buys and one Hold. The average Outbrain price target of $7.40 implies a whopping 89.7% upside potential to current levels.
Ending Thoughts
Outbrain appears to be well-positioned to earn higher revenue once the advertising market recovers. However, investors must be aware of the potential risks involved with investing in penny stocks, as these can be highly speculative. A further lull in advertising spending may impact OB’s chances of an upward trajectory.
