Taboola Stock: Digital Solutions Stock Down 85% & Could Triple

Taboola.com Ltd. Helps Companies Generate Revenue From Digital Assets

The move toward digital technology is accelerating; it’s not a fad. The global digital transformation market could grow at a compound annual growth rate (CAGR) of 23.1% from 2022 to 2030. With a market of about $608.6 billion in 2021, that CAGR implies a potential market of $3.9 trillion by 2030. (Source: “Digital Transformation Market Size, Share & Trends Analysis Report,” Grand View Research, last accessed August 30, 2022.)

Opportunities in the digital space are obviously significant, but many companies need help to optimize those opportunities. This is where Taboola.com Ltd (NASDAQ:TBLA) comes in. Taboola applies artificial intelligence to helping companies monetize their digital assets.

Taboola currently works with more than 15,000 advertisers, including some of the biggest names in retail and media. According to the company, its recommendations have resulted in more than one million transactions each month for to its clients. (Source: “Taboola Reports Q1 2022 Results,” Taboola.com Ltd, May 12, 2022)

Although the company’s prospects are excellent, TBLA stock has plummeted by a staggering 66% in 2022. In January 2021, Taboola stock was trading at $17.20. Since then, it has declined by 85% to below $3.00.

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Taboola.com Ltd had a market valuation above $3.5 billion before declining to its current valuation of $693.0 million.

The following chart shows huge potential. TBLA stock moving to the horizontal Fibonacci retracement level of $8.08 would represent a more than tripling in price.

Chart courtesy of StockCharts.com

There’s no guarantee that Taboola stock will ever trade at its high again, but the risk/reward trade-off at its current price is ideal for risk-capital investors.

Strong & Improving Financials

Taboola.com Ltd delivered $1.4 billion in revenues in 2021, resulting in an attractive multiple of 0.5 times its 2021 revenues.

The company has produced more than $1.0 billion in annual revenues since the beginning of 2019. The revenue growth was initially helped by the COVID-19 pandemic, but Taboola.com Ltd continues to report healthy revenues.

Analysts estimate that Taboola will earn revenues of $1.5 billion this year and then grow that by 14.1% to $1.7 billion in 2023. (Source: Ibid.)

The company recently reduced its own full-year 2022 revenue guidance from $1.67–$1.68 billion to $1.5–$1.54 billion. (Source: Taboola.com Ltd, May 12, 2022, op. cit.)

Even so, the lowered guidance gives TBLA stock an attractive revenue multiple.

Fiscal YearRevenuesGrowth
2018$909.2 MillionN/A
2019$1.1 Billion20.3%
2020$1.2 Billion8.7%
2021$1.4 Billion15.9%

(Source: “Taboola.com Ltd. (TBLA), “ Yahoo! Finance, last accessed August 30, 2022.)

Taboola delivered normalized earnings before interest, taxes, depreciation, and amortization (EBITDA) income in each of the last four years.

Fiscal YearNormalized EBITDA (Millions)Growth
2018$52.6N/A
2019$19.7-62.5%
2020$60.2204.9%
2021$39.8-33.8%

(Source: Ibid.)

Taboola.com Ltd’s bottom line has seen generally accepted accounting principles (GAAP) diluted earnings-per-share (EPS) losses, but I expect this situation to improve.

Fiscal YearGAAP Diluted EPS
2018-$0.19
2019-$1.06
2020-$0.31
2021-$0.26

(Source: Ibid.)

Moreover, Taboola.com Ltd. churned out positive free cash flow (FCF) in three of the last four years.

Fiscal YearFCF (Millions)
2018$44.8
2019-$26.3
2020$121.3
2021$24.5

(Source: Ibid.)

Analyst Take

In my view, Taboola.com Ltd’s strong revenues, EBITDA, and FCF have been underappreciated by the stock market.

Taboola stock’s significant price deterioration and resultant low valuation make it compelling for risk investors.

A sustained move to the risk on trade and momentum could lead TBLA stock to easily double or triple and still not look expensive. The key for investors will be dealing with volatility and having patience.