Outbrain Shares Plunge 12% Despite Strong Q2 Results

Outbrain Inc. (OB) reported its first quarterly results as a public company. Shares plunged 12.3% on the news, closing at $16.74 on August 17.

Outbrain is a recommendations platform for the open web. Shares have lost 16.3% since their initial public offering on July 23, 2021. (See Outbrain stock charts on TipRanks)

The company reported earnings of $0.28 per share, significantly better than the year-ago period’s loss of $0.16 per share.

In other positive news, revenue for the quarter grew 57% year-over-year to $247.15 million. The revenue boost was aided by net revenue retention from existing partners, as well as a small contribution from new media partners.

Encouragingly, David Kostman, Co-CEO of Outbrain said, “The premium nature of our media partners and the overall superior quality of our platform continue to be key differentiators and support our strong momentum in the marketplace. We are encouraged by the current trends we see in our business as we continue to strengthen our leadership in the open web.”

Yesterday, Needham analyst Laura Martin initiated coverage of Outbrain with a Buy rating and assigned a price target of $25, implying 49.3% upside potential to current levels.

Martin noted a few of Outbrain’s positive aspects for the optimistic view on the stock. According to the analyst, OB has a low client churn out rate due to its exclusive contracts and has 100% control over website content and ad unit monetization.

Additionally, OB has an AI-driven tech stack giving it an advantage over potential new entrants and has a proven, globally scaled platform with 60% international revenue contribution.

To add to that, OB operates in an Oligopolistic market with only one meaningful competitor. Markedly, the total addressable market of Open Internet ad revenues is estimated at about $30 billion in the U.S. alone in 2021, which according to the analyst, enables the company to maximize revenue growth.

Overall, the stock commands a Strong Buy consensus rating based on 4 Buys and 1 Hold. The average Outbrain price target of $25.80 implies 54.1% upside potential to current levels.