The Exchange: Criteo, Standing in the Shadows of Giants

You may not have heard of Criteo–but chances are, it’s probably heard of you. Criteo (NASDAQ: CRTO) isn’t the latest NSA escapade; rather, it’s a recently public company specializing in targeted advertising, or “retargeting”, to cater to Internet users. Based in France, the $1.8 billion-valued corporation utilizes over eight years of data regarding consumer habits such as browsing history and transactions to generate ads that would best capture clicks and purchases. The algorithm undergirding Criteo’s business model, Criteo Engine, accomplishes this feat in number-crunching in just over 100 milliseconds.

Criteo currently serves over 4,000 clients primarily in the U.S. and Europe, with offices in 14 countries and a clientele base shooting up at approximately 50% year-over-year. Profits of the company increased a jarring 500% the previous quarter amid a sales growth of 60%.

Even as it tracks over 900 million users a month, Criteo is ultimately seconded by Google’s advertisement Display Network in terms of consumer outreach, which could hamper future growth in its customers. Similarly sized competitors in the business of advertising technology such as The Rubicon Project (NYSE: RUBI) and RocketFuel (NYSE: FUEL) are aplenty, and Criteo has little to offer to differentiate itself from them apart from marginally better earnings and an $11 million free cash flow over the past year. Criteo’s stock itself has displayed volatility, starting at $31 per share and peaking at $60 before returning to its IPO price. A sizeable 30% sales growth for the company is expected, as well as a 16% EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margin (up from a planned 7.1% margin in 2013). Criteo’s biggest hurdles arise from a perhaps-too-similar flock of competitors as well as its inferiority in the face of Internet giants such as Google (NYSE: GOOG), which could much more efficiently effect sweeping change across an advertising industry constantly shifting mediums.

Additional disclosure: Not investment advice. I am not an investment adviser. Facts and opinions presented represent my state of knowledge and thinking at the current time. Prospective or actual investors in CRTO may wish to perform their own independent research.

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