Morgan Stanley Cuts Criteo Target to $20 as Estimates Splinter

Morgan Stanley cut its price target on Criteo (NASDAQ:CRTO) from $25.00 to $20.00 on Tuesday, keeping an equal weight rating on the commerce media company, according to Benzinga. The 20 percent reduction arrives one week after the firm missed consensus earnings and reported revenue down 16.7 percent year on year.

The cut is not an outlier. It is the fourth downward revision from a major house in three months, and the spread of targets has widened rather than converged.

What are the other analysts saying?

• Huber Research downgraded Criteo from overweight to underweight on Monday, August 24.
• Sanford C. Bernstein cut the stock from outperform to market perform on Thursday, August 6, lowering its target from $35.00 to $20.50.
• Wells Fargo reduced its price objective from $15.00 to $14.00 and kept an equal weight rating on Thursday, November 5.
• Citigroup trimmed its target from $23.00 to $21.00 but retained a buy rating, also on Thursday, November 5.
• Weiss Ratings moved the stock from sell (d) to sell (d+) on Wednesday, November 4 — an upgrade in label only, and still a sell.

In total, six analysts rate Criteo a buy, four a hold and two a sell. MarketBeat.com calculates an average rating of hold and an average target price of $20.85. Note what the average conceals: the individual targets run from Wells Fargo's $14.00 to Citigroup's $21.00, a 50 percent gap between the low and the mean's own neighborhood. When estimates scatter this widely, the consensus figure carries little analytical weight.

What did the last quarter show?

Criteo reported quarterly results on Wednesday, November 4. Earnings per share came in at $0.43, missing the consensus estimate of $0.57 by $0.14. Revenue reached $416.47 million against analyst estimates of $239.18 million — a large beat on the top line, yet revenue still fell 16.7 percent from the same quarter a year earlier, when the company posted $1.31 in earnings per share. The return on equity stands at 10.88 percent and the net margin at 3.99 percent. Sell-side analysts on average predict $2.58 in EPS for the current fiscal year.

The pattern deserves scrutiny. Revenue beat the estimate by a wide margin while EPS missed by a quarter of the expected figure. Either the estimates were stale, or costs compressed margins faster than the top line implied. Neither reading supports comfort.

How is the stock trading?

Shares opened at $17.43 on Tuesday, down 0.7 percent. The market capitalization sits at $857.73 million, with a price-to-earnings ratio of 12.63 and a beta of 0.35. The 50-day simple moving average is $15.90; the 200-day average is $17.93. The stock has traded between a 12-month low of $13.95 and a 12-month high of $25.29.

The share price now sits above its 50-day average but below its 200-day average — a technical position that signals recovery without confirming it.

What are insiders and institutions doing?

CEO Michael Komasinski sold 1,656 shares on Friday, August 28 at an average price of $17.28, a transaction worth $28,615.68. The filing states the sale covered tax withholding obligations tied to the vesting of equity awards — a routine reason, though routine does not mean meaningless. Komasinski retains 343,891 direct shares valued at $5,942,436.48; the sale reduced his ownership by 0.48 percent. Insiders have sold 2,855 shares worth $48,898 over the past three months and hold 1.52 percent of the stock.

Institutional investors moved the other way in the first quarter:

• Senvest Management LLC added 200,000 shares, raising its stake 4.5 percent to 4,597,322 shares worth $82,430,000.
• Janus Henderson Group PLC added 77,145 shares, up 4.6 percent to 1,769,644 shares worth $31,774,000.
• Arrowstreet Capital Limited Partnership added 94,389 shares, up 10.7 percent to 975,109 shares worth $17,484,000.
• Sei Investments Co. added 78,834 shares, up 47.2 percent to 246,026 shares worth $4,411,000.
• Amundi added 13,623 shares, up 24.2 percent to 69,835 shares worth $1,252,000.

Institutions own 94.27 percent of the shares outstanding. Yet those first-quarter purchases predate the November earnings miss and the wave of target cuts. Whether they have held through the revision cycle is a fact the disclosures do not yet show.

What is Criteo, in plain terms?

The company provides advertising technology to brands, retailers and media owners. Its platform applies commerce data and artificial intelligence to plan, deliver and measure digital advertising across websites, apps and other channels. Offerings include Performance Media for advertisers and Retail Media services that let retailers build and manage advertising programs.

Morgan Stanley's cut matches the crowd; the question the filings cannot yet answer is whether $20.85 represents a floor or a waypoint.