On Wednesday, Outbrain Inc (NASDAQ: OB) saw its price target increased by Needham from $6.00 to $9.00, while the firm maintained a Buy rating on the stock. Currently trading at $7.58 and near its 52-week high of $7.70, InvestingPro analysis suggests the stock is slightly undervalued.
The adjustment comes in anticipation of Outbrain's acquisition of Teads, which is expected to close in the first quarter of 2025. The acquisition has received all necessary approvals, with the exception of the one from the United Kingdom (TADAWUL:4280).
Needham anticipates that the acquisition will provide significant benefits to Outbrain, including $30 million in cost synergies within the first 24 months post-closing. The joining of Teads, a larger entity, with Outbrain is projected to result in a company with more liquidity and a larger competitive scale. InvestingPro data shows Outbrain currently maintains strong liquidity with a current ratio of 1.2 and holds more cash than debt on its balance sheet.
Furthermore, Outbrain has minimum contractual guarantees with several of its largest clients, which ensures a fixed revenue regardless of market fluctuations. With the added demand from Teads, analysts believe that the payouts from these minimum guarantees will be eliminated, further strengthening Outbrain's financial position.
The Needham analyst also mentioned that on January 15, 2024, at the 27th annual Needham Growth Conference in New York City, there will be a fireside chat with Outbrain's CEO, David Kostman. During this event, the analyst plans to address the top 10 investor questions to gain more insights into the company's strategy and outlook.
The positive outlook on Outbrain's acquisition of Teads and its expected financial benefits have led to the raised price target, reflecting the firm's confidence in the value proposition of the merger. The stock has demonstrated remarkable momentum, delivering an 84% return over the past year. For deeper insights into Outbrain's valuation and 18 additional ProTips, consider accessing the comprehensive Pro Research Report available on InvestingPro.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.