Outbrain Inc. OB shares have plummeted 39.2% in three months against the 8.1% decline of its industry and the 7.5% fall in the Zacks S&P 500 Composite.

Three Months' Price Performance

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OB’s performance is significantly lower than that of its industry peers, Amadeus IT Group, S.A. AMADY and Katapult Holdings, Inc. KPLT. AMADY and KPLT have gained 10.5% and 72.6% over the past three months, respectively.

The dip in Outbrain’s shares might compel investors to buy it. However, the vital question is whether this is the right time for investors to add the stock to their portfolio. Let us dig deeper.

Teads to Boost OB’s Top Line

Outbrain has a remarkable global reach with more than 2 billion unique users and proprietary data signals via its exclusive content page with the most premium media assets. The recent acquisition of Teads strengthens OB’s global reach since the acquired company has more than 50 joint business partnerships with leading premium brands across the globe, including Apple, Visa, Louis Vuitton, Nissan and McDonald’s.

These partnerships generate $5-$20 million per year on average. Therefore, it is evident that partnerships as such will contribute significantly to Outbrain’s top line.

Outbrain Benefits From Media Owner Partnerships

OB is focusing on deepening its premium media owner partnerships. In the fourth quarter of 2024, the company renewed agreements with vital publishing partners, including Spiegel in Germany, II Messaggero in Italy and Grape in Japan. Also, Outbrain secured new business partnerships from competitors and launched new partners, including Penske Media in the United States and Prensa Iberica in Spain.

The acquisition and retention of partners portray the value proposition that OB offers in terms of relationships with premium publishers across the globe. These partnerships serve a consistent supply of unique premium assets for Outbrain while providing important user insight required to optimize its operations and predict future trends.

AI to Boost OB’s Customer Base

In the fourth quarter of 2024, more than 70% of Outbrain’s customer base used its AI-based Creative Automation suite. The creative automation suite delivers more relevant and highly targeted creatives optimized for customer engagement using OB’s predictive insights to fuel the product’s gen-AI. Management plans to use AI to create greater continuity of experience across the consumer journey, leveraging OB’s inventory environments from CTV home screens to premium publishers, as well as its in-house Creative Studio that uses data and interactivity to deliver video and viewable display assets that deliver on KPI’s of the advertisers.

Considering the current customer engagement with AI and OB’s plan to propel its use in the future, we anticipate the company’s customer base to expand further on the grounds of heightened efficiency and better results.

Outbrain Stock Looks Undervalued

OB shares look cheap and appealing to investors. It is priced at 9.9 times forward 12-month earnings per share, which is lower than the industry’s average of 37.4 times.

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When looking at the trailing 12-month EV-to-EBITDA ratio, OB is trading at 3.8 times, way below the industry’s average of 41 times.

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OB’s FY25 Top & Bottom-Line Prospects Look Strong

The Zacks Consensus Estimate for Outbrain’s 2025 revenues is $600.2 million, implying a more than 100% year-over-year growth. The consensus estimate for OB’s 2025 earnings stands at 36 cents per share, indicating a turnaround from the loss of a penny reported in the preceding year.

Outbrain’s Robust Liquidity Position

In the fourth quarter of 2024, the company’s current ratio of 1.2 was lower than the industry average of 2.1. OB has a current ratio of more than 1, which implies that it might be easily able to pay off short-term debt.

It is the Right Time to Buy Outbrain

Outbrain’s global reach surpasses 2 billion users and data signals. The Teads buyout augments customer reach and boosts OB’s top line through its more than 50 existing premium partnerships. The expansion and retention of Outbrain’s premium media partnerships are vital for its operations and for predicting trends in the market. The company’s commitment to AI integration is anticipated to result in more customer wins, expanding its client base. A strong liquidity position is another green flag.

OB is fundamentally strong and currently trades at a discounted valuation. We recommend buying the stock now to capitalize on its long-term growth potential.

Outbrain carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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