This Ad-Tech Firm Looks Attractive
The fears about the impact of Apple's ITP on narrow-moat Criteo's business are overblown.
In our view, the recent decline in Criteo's (CRTO) shares has created an attractive entry point for potential investors. We believe the stock has been retreating mainly due to fears surrounding the potential impact of Apple’s Intelligent Tracking Prevention, or ITP, on the Safari 11 browser, in addition to a negative research report that disputes Criteo’s ability to generate high return on investment, or ROI, for its advertising clients. We reiterate that our revenue growth estimates for Criteo already consider potential headwinds from Apple’s ITP. While we concede that ad fraud may take place in the digital ad space, we think Criteo, along with its peers, have taken steps to minimize it by increasing transparency. Further, we note the presence of independent organizations and third-party data providers that help advertisers validate campaign performance data provided by ad tech firms. With the stock down 12% in the past month to $42, Criteo is now trading at a 17% discount to our unchanged $51 fair value estimate, which represents a buying opportunity, in our view. Our ratings on Criteo’s moat and moat trend remain unchanged at narrow and negative, respectively.
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Ali Mogharabi does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.