Why Criteo S.A. Dropped Today

What happened

Shares of Criteo S.A. (NASDAQ: CRTO) were down 19.8% as of 12:48 p.m. EDT Wednesday after the advertising retargeting specialist announced solid second-quarter 2018 results, but reduced its full-year guidance.

More specifically on the former, Criteo’s quarterly revenue excluding traffic acquisition costs (ex-TAC) grew 4.7% year over year, or 2% at constant currency, to $230.2 million, which translated to 36% growth in adjusted net income per share to $0.53. By comparison, Criteo’s top line arrived above the high end of guidance provided in May for a revenue ex-TAC range of $226 million to $230 million, and most investors were anticipating lower adjusted earnings of $0.39 per share.


So what

“From conversations I have had with clients since returning as CEO, I’ve heard many positive comments on the value we bring,” added Criteo CEO JB Rudelle. “We are building on this trust to expand our client relationships with more products and solutions.”

To be sure, Criteo saw its commerce and brand client base grow 16% year over year to 19,000, while client retention remained close to 90%. And revenue ex-TAC driven by Criteo’s non-retargeting products soared 72% at constant currency this quarter, albeit to just 6% of total sales.

Now what

For the third quarter of 2018, however, Criteo sees revenue ex-TAC arriving between $218 million and $223 million, or a constant-currency decline of 5% to 3% from the same year-ago period. Analysts, on average, were expecting revenue ex-TAC closer to $244 million.

Criteo also lowered its full fiscal-year guidance for revenue ex-TAC growth to be flat, plus or minus 1%, down from previous guidance for 3% to 8% growth.

During the subsequent conference call, Rudelle explained that the company’s transition from a single product to a multi-product platform has progressed, “so far, way too slow,” while its “decision-making processes regarding product roadmap priorities have not always been fast enough.”

As such, Criteo is undertaking a business transformation, Rudelle says, “that will take some time to produce its effects.”

In the end, our market hates being told to hurry up and wait, so it’s no surprise to see the stock pulling back in response today.

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Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Criteo. The Motley Fool has a disclosure policy.

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