PERI has price target cut at Roth, keeps “Buy” rating

Following fourth quarter results he describes as “in-line” Roth MKM analyst Jeff Martin has cut his price target on Perion Network (Perion Network Stock Quote, Chart, News, Analysts, Financials NASDAQ:PERI).

On February 7, Perion reported its fourth quarter and fiscal 2023 results. In the fourth quarter, the company posted Adjusted EBITDA of $53.9-million on revenue of $234.2-million, a topline that was up 12 pre cent over the same period last year.

“Our fourth quarter and annual results showed notable growth in Search, CTV and Retail Media, further demonstrating the positive impact of our business diversification and continued focus on technology and innovation. In 2023, we generated industry-leading adjusted EBITDA to Contribution ex-TAC margins, giving us a solid foundation for 2024,” said CEO Tal Jacobson. “As advertising budgets shifted between channels, we capitalized on these trends and delivered profitable growth well ahead of the digital advertising market for 2023. We also advanced our growth strategy with the acquisition of Hivestack, a leading innovative full-stack programmatic digital out-of-home (DOOH) company with an extensive global footprint. The acquisition of Hivestack, alongside our existing offering, solidifies Perion’s differentiated offer to our customers. It’s a significant entry into the fast growing DOOH channel, which opens up new synergistic opportunities within our suite of solutions for brands and retailers. By adding critical touch points to the entire consumer journey across channels such as CTV, Audio, Out Of Home, including our products for Near-store and In-Store screens – we are transforming our Retail Media suite into a pure multi-channel, full consumer journey solution.”

The analyst says these results may have taken the street by surprise, given the company’s strong record of outperformance.

“In three years of covering PERI, we have seen consistent beat and-raise quarters until now,” Martin noted. “We believe the market was caught off guard by the 3% decline in Display Advertising in 4Q23 and the resulting lower contribution margin (ex-TAC) due to a higher mix of Search Advertising. While Search Advertising beat our estimate by 17%, Display Advertising was 11% below our model, driven by a 33% y/y decline in Video to $35M. Strength in Retail (+196% y/y to $20.2M) and CTV (+68% y/y to $14.4M) partially offset the Video decline. This mix shift led to a 310bps lower contribution margin y/y of 38.7%. Management outlined on the call it anticipates a return to 41% contribution margin in 2024.”

In a research update to clients February 7, the analyst maintained his “Buy” rating on PERI but cut his price target on the stock from $40.00 to $35.00.

The analyst thinks PERI will post EBITDA of $177.5-million on revenue of $869.0-million in fiscal 2024. He expects those numbers will improve to EBITDA of $206.9-million on a topline of $979.1-million the following year.