Cowen Would Buy Criteo (CRTO) Amid Recent Weakness; Ad Blocking Remains Manageable Issue

Cown and Company affirms Criteo SA (Nasdaq: CRTO) with an Outperform rating and $58 price target following an investor meeting held with company executives last weekend.

Analyst Thomas Champion noted the following key points:

Demand Environment Strong; Product Strength Yielding Customer Wins

Mgmt. told us Retargeting is generally a tactic well known to E-commerce marketers. In bringing on a new client, CRTO often displaces an incumbent, usually a publisher or an Ad Tech provider. The sales process often involves a head-to-head trial. Competitive differentiation includes 1) access to both GOOG and FB; 2) core product technology and performance-driven model; and 3) ability to optimize over time. Overall, market penetration is low (6% mid-market penetration WW is representative), suggesting ample room for customer acquisition. Integration is usually rapid (typically <3 weeks) and post-launch support focuses on optimization and customer education (key metrics include eCPM, etc.). Mid-market sales personnel in Boston currently number 40, with responsibility for all Americas (ex-Brazil).

Publisher Opportunity Remains Large

Mgmt. discussed CRTO's Retargeting product from an 'ecosystem' perspective and the importance of recruiting and maintaining a diverse publisher base (managed by15 person team). With 50k+ publishers in the US and only a few thousand partners, there remains plenty of room to expand publisher base. For publishers, the CRTO value proposition includes better pricing relative to an Exchange and incremental demand. CRTO forges direct relationships and pays a premium to receive better inventory, reach Users sooner in their journey and collect data. Lots of inventory is being created at all times and ad formats with rising importance include Native, In-App and Social.

Ad Blocking: Still Appears to be A Manageable Issue

Despite the surge of press around Ad Blocking, mgmt. told us it is not having an impact on the business. Importantly, CRTO operates a performance model, so keenly aware of format considerations (users must engage with an ad for CRTO to get paid). Ad blockers have been around for a long time and mgmt. does not see a shortage of inventory across specific demos. Est.'s of ~5% of users employing blockers seems appropriate based on experience.

For an analyst ratings summary and ratings history on Criteo S.A. click here. For more ratings news on Criteo S.A. click here.

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