Analysts Diverge On Their View Of Criteo; Did The Market Side With The Bull Or The Bear?

The weakness of the shares could be traced back to concerns about Apple Inc. AAPL's Intelligent Tracking Prevention exposure of Criteo.

Commenting on the development, sell-side analysts offered diverging views concerning Criteo. Although the market punished the stock in a knee-jerk reaction as it shed 12.3 percent over two sessions, it rebounded Friday.

Stock Poised For A 67-77 Percent Decline

Gotham City Research analyst noted that Criteo revealed that its exposure to Apple ITP was 20 percent of revenues and not 8 percent, as widely believed. The analyst sees Apple's pro-privacy initiatives as a threat to Criteo's business model but believes the company is facing even greater problems.

Among those areas of concern include the company deriving over 50 percent of its revenues from suspect sources, such as clickbots, fake/low quality websites and the company taking credit for sales of clients, which it did not contribute to.

Consequently, Gotham City Research believes clients will either leave or ask for reimbursement from the company, citing brand safety and revenue misattribution concern. Additionally, the firm thinks Criteo's sales and profits will decline due to increased scrutiny, which in turn will drag the stock by 67–77 percent.

Attractive Risk/Reward

KeyBanc Capital Markets analysts Andy Hargreaves, Evan Wingren and Tyler Parker believe Criteo's Shopper Graph has potential to new product areas, deepen partnerships and expand its moat.

"Criteo is building out a robust product set to help its clients address the threat of Amazon.com, Inc. AMZN and expand its TAM," the analysts said.

Meanwhile, the analysts think the Apple issue will be transitory, with marginal lasting impact. This, according to the firm, creates an attractive risk/reward.

The firm noted that Apple's ITP rolls out with iOS 11 to disable third-party tracking cookies after 24 hours. However, the firm said Criteo has a workaround that could prove effective with direct publisher relationships.

For ads purchased through an exchange, the firm thinks Criteo will rely largely on Alphabet Inc GOOG GOOGL to expose incremental data, believing "incentives are aligned, making an agreement likely."

KeyBanc Capital Markets maintains its Overweight rating and $62 price target for the shares of Criteo.