Taboola Draws Analyst Praise For Meta-Like AI, Exclusive Ad Deals, Growing Role In CTV, Display Ads

Needham analyst Laura Martin maintained Taboola.com TBLA with a Buy and raised the price target from $3.34 to $4.50 on Tuesday.

Martin backed the rerating, citing Taboola’s exclusive supply, unique data, self-service, CTV, generative AI-driven cost savings, double-sided platform, open internet focus, Realize Platform and Yahoo deal.

Martin noted Taboola is a leading performance AdTech company that competes in the open internet.

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The analyst said the company places performance ads on websites with five to seven year exclusive deals to sell ads. Taboola revenue shares with the content owner, typically keeping about 35% of total ad revenue generated, she said.

Martin noted Taboola aggregates data from 600 million DAUs. The analyst said that its proprietary data comes from direct integrations with publishers’ websites, which gives it meaningful targeting advantages.

Martin said Taboola’s generative AI assistant, Abby, enables self-service ad creation and ad campaign management, similar to Meta Platform Inc.’s META automated ad setup process. She said Abby’s self-service tools allow Taboola to attract small- and medium-sized advertisers for the first time.

As per the analyst, Taboola is seeing the chance of integrating performance metrics into CTV ads. She said it aims to use its data to help advertisers drive leads and conversions from CTV campaigns based on its unique data assets.

Martin said Taboola drives productivity gains by integrating generative AI (GenAI) across treasury, FP&A, R&D and sales. The company is focused on maximizing AI adoption to reduce costs and improve efficiency metrics, including using tools like Alphabet’s Google’s Gemini for data analysis and encouraging GenAI-driven coding in R&D and new product development.

Martin said Taboola AdTech’s product is an end-to-end solution as it owns a DSP and an SSP. More than 90% of the company’s revenue comes from direct advertiser relationships it controls, and about 90% of its supply comes through exclusive five- to seven-year contracts with website owners, she noted.

Taboola’s new Realize platform expands its TAM from selling only native ads to also generating revenue from selling display and video ads, Martin said. The company noted that display ad spending is about three times larger than native ad revenue, which expands its TAM, the analyst said.

In November 2022, Yahoo and Taboola signed a 30-year partnership, during which Taboola sold all native ads on all Yahoo properties, Martin noted. The analyst notedthis deal doubled Taboola’s adjusted EBITDA and FCF within 18 months.

For the second quarter, Martin expects Taboola to report net revenue (ex-TAC) of $161.7 million (up 8% Y/ and), adjusted EBITDA of $41.9 million (up 13% Y/Y, for a 26% margin). The company expects to convert 50%–60% of adjusted EBITDA into FCF.

TBLA Price Action: Taboola shares are trading higher by 4.92% at $3.74 at publication on Tuesday.

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