Perion Network Ltd. (NASDAQ: $PERI) is a global technology company that offers services to digital advertisers and publishers, including search, social, and mobile advertising products and services. Its platforms and tools help businesses optimize their digital marketing campaigns and effectively reach their target audiences.
On Monday, Perion Network shares experienced a significant decline after the company announced weaker-than-anticipated preliminary first-quarter 2024 results and a downward revision of its 2024 outlook.
Bing Changes Impact Perion’s Q1 2024 Performance
Perion expects its Q1 2024 revenue to reach $157 million, representing an 8% year-over-year increase but falling short of Wall Street’s expectations of $175.5 million, or growth of nearly 21%. Additionally, the company’s adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) for the quarter is expected to decline by 36% year over year, reaching $20 million.
The primary driver behind Perion’s performance challenges was a decline in its Search Advertising activity, which the company attributed to changes in advertising pricing and mechanisms implemented by Microsoft Bing in its Search Distribution marketplace. These changes decreased Revenue Per Thousand Impressions (RPM) for Perion and other Microsoft Bing partners, ultimately reducing search volume.
Diversifying for Long-Term Success
Despite the challenges in the first quarter, Perion’s management is optimistic about its long-term prospects. Tal Jacobson, Perion’s CEO, emphasized that the company’s relationship with Microsoft remains strong, and both organizations continue to explore more opportunities to collaborate on various digital advertising solutions.
Jacobson stated, “Our strategy was, and continues to be, grounded in a fundamental principle of making sure our solutions are diversified in terms of technologies, channels and partners, while focusing on the needs of our customers, brands and retailers across the digital advertising domain.”
According to the CEO, Perion’s strategy is centered on diversifying its offerings and focusing on the needs of its customers, brands, and retailers across the digital advertising domain. The company is expanding and strengthening its solutions and technologies by leveraging its cash flow generation and strong cash balance of almost half a billion USD to acquire complementary and additive companies.
Perion’s Long-Term Growth Drivers
One of the key drivers of Perion’s long-term success is its focus on expanding its Display Advertising activity, which includes AI-driven Connected TV (CTV), Retail Media, and Digital out-of-home (DOOH) solutions. The growth drivers maintained strong performance in Q1 and are poised to contribute significantly to the company’s results in 2024.
Revised 2024 Outlook and Share Buyback Program
Given the challenges in the Search Advertising segment, Perion has revised its outlook for the full year 2024. The company foresees its revenue of $590 million to $610 million, marking a 19% decline year over year at the midpoint of the range. It marks a significant shift from the initial estimate of $860 million to $880 million, representing a 17% year-over-year growth at the midpoint of the range.
Moreover, Perion has adjusted its forecast for 2024 adjusted EBITDA, now expecting it to be between $78 million and $82 million. It is a significant reduction from the initial guidance of $178 million to $182 million. The downward revision is primarily attributed to challenges faced in the Search Advertising segment and web video activity.
Despite the revised outlook, Perion’s management and board of directors have approved an increase to the existing share buyback program from $50 million to $75 million, reflecting their confidence in the company’s competitive positioning and long-term success in the digital advertising landscape.
Perion Network Stock Update
On Monday, April 8, Perion Network’s shares concluded the day at $12.50, reflecting a notable decline of 40.79% from its prior closing figure of $21.11. This downturn followed the announcement of preliminary first-quarter 2024 results, which fell below expectations. On Tuesday, PERI shares recovered some of the losses, rising 3.12% as of 01:02 PM EDT to $12.89 per share.
Perion’s stock closed below its 50-day and 200-day Moving Averages, declining by 59.51% since the year began due to heightened competition from industry giants like Google and Meta Platforms. Its Average Volume over three months stands at 749.04k shares, with a market capitalization of $587.994 million.
Wall Street Analysts Bullish on PERI
Based on recent assessments by Wall Street analysts, Perion Network’s 12-month price targets indicate an optimistic outlook. The average target price is $32.80, with a high projection of $35.00 and a low projection of $25.00. It suggests a potential 162.40% increase from the current price of $12.50.
Wall Street analysts recommend buying PERI shares, reflecting confidence in its future performance and indicating their belief that PERI stock is undervalued compared to its industry peers.
Should You Invest in Perion Network?
Perion Network faced significant challenges in the first quarter of 2024 due to a decrease in Search Advertising activity resulting from alterations in Microsoft Bing’s distribution marketplace. It led to weaker-than-expected preliminary results and a downward revision of the company’s outlook for the year. Despite these setbacks, Perion focuses on diversification, strategically emphasizing expanding its Display Advertising activity.
The company’s management is optimistic about long-term prospects, leveraging its cash flow and strong cash balance to acquire complementary companies. Despite the revised outlook, Perion’s confidence is underscored by an increased share buyback program, reflecting a belief in its competitive positioning.
Wall Street analysts also maintain a bullish stance on Perion, with optimistic price targets indicating potential growth. Perion Network retains a strategic vision for sustained success amid challenges in the dynamic digital advertising landscape.
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