Taboola Updates Guidance, Provides FY22 Outlook

Taboola.com Ltd. (TBLA), a global recommendations provider for the open web, updated its third-quarter and full-year 2021 guidance, provided its full-year Fiscal 2022 outlook, and also presented its e-Commerce strategy following the acquisition of Connexity on September 1. Shares fell 2% on the news, closing at $8.90 on September 28.

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Connexity is one of the largest e-commerce media platforms on the open web, and acquiring it brought about 6,000 publishers and 1,600 direct merchant relationships to Taboola, thereby providing more opportunities to publishers, advertisers, and merchants to grow outside of the walled gardens. (See Taboola stock charts on TipRanks)

Following the Connexity acquisition, Taboola stated that its total addressable market (TAM) has increased to $124 billion, including $64 billion of open web and $60 billion of e-Commerce advertisement spend in walled gardens.

Commenting on the synergies and the revised guidance, Adam Singolda, Founder & CEO of Taboola, said, “We estimate that a third of our own revenue, as well as publishers in the open web, will come from e-commerce over time. Especially on the back of a pandemic, people are buying online – and it’s better to buy from a trusted, editorial publisher.”

Singolda added, “e-commerce will supercharge our business and position us to capture more of the $100B+ of available TAM. With Connexity, in 2022 we will be more than double what we were in 2019 in terms of ex-TAC Gross Profit and we project $100 million in annual ex-TAC gross profit synergies within four years – roughly equivalent to adding another Connexity. We are laser-focused on execution and delivering on the huge opportunity before us.”

Based on the assumption that the global economy continues to rebound and no significant deterioration in advertiser or consumer demand, Taboola updated its Q3, FY21 projections, and initiated FY22 guidance, including Connexity’s financials starting September 1, 2021.

For the third quarter, TBLA guided for revenue of between $338 and $342 million and a net loss of between $7 and $5 million.

For full-year 2021, revenue and net loss are forecast to be in the range of $1.39 – $1.40 billion and $41 – $35 million, respectively.

Moreover, for 2022, Taboola forecasts revenue in the range of $1.698 – $1.748 billion and net income (loss) to be between ($18) and $2 million.

In response to Taboola’s updated guidance and strategic outlook, Needham analyst Laura Martin maintained a Buy rating on the stock with a price target of $13, implying 46.1% upside potential to current levels.

Martin said, “We believe TBLA’s platform services add value in non-monetary forms that effectively lower the fees it is required to pay its publisher clients in cash to attract and keep them. We believe many of these services lock in existing clients, making it hard for them to churn away from TBLA, which maximizes TBLA’s long-term value per client. Finally, in direct competition for new business, TBLA has “extras” that it delivers to potential new clients for free, which makes it more likely to win a new client for the same (or lower) cash guarantee or revenue share.”

With 6 unanimous Buys, the stock commands a Strong Buy consensus rating. The average Taboola price target of $16 implies 79.8% upside potential to current levels. Shares have lost 11% over the past year.