For online marketing firm Taboola (NASDAQ:TBLA), even a quality earnings report couldn’t keep its share price aloft. Though Taboola posted beats all around, its projections for the next year likely put a bit of a crimp in things. Investors were clearly not happy, and Taboola closed down over 19% in Friday’s trading.
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Taboola’s earnings for the fourth quarter turned out nicely. It posted earnings per share of $0.16, which beat projections calling for $0.05 per share. Revenue also had a bit of a narrow win, coming in at $371.26 million, which beat estimates calling for $367.6 million. While Taboola’s earnings did beat projections, they were also 8.9% short of where they were in the fourth quarter of 2021. That was where the troubles at Taboola started.
Future projections suggested that Taboola would pull in between $1.419 billion and $1.469 billion. That range largely matches consensus projections of $1.42 billion but leaves the possibility open for a miss later. Worse, Taboola noted that 2023 guidance “…assumes an investment year to support Yahoo transition and growth initiatives.” That doesn’t bode well for short-term profitability. However, there are signs that this will be a temporary problem. First, Taboola notes that 2024 will have “…partial Yahoo revenue contribution.” Second, Taboola also recently inked a deal with Time Out that should help provide some more revenue in its own right.
The short term may not look great for Taboola, but hedge funds are holding the line. Currently, hedge fund sentiment is considered Positive overall, as they increased their holdings by 1.5 million shares last quarter. That’s the second consecutive quarter that hedge funds bulked up their Taboola investment, suggesting something big may indeed be ahead.
