INTERNATIONAL - Criteo fell to a record low after Facebook downgraded its relationship with the Internet ad platform, removing the company from the tech behemoth’s marketing partner list.
Facebook decertified Criteo as a marketing partner on July 1, Goldman Sachs analyst Heath Terry said. “This means that Criteo is no longer referenced as a Facebook preferred marketing partner and that the company will not have access to beta testing new features on the platform,” he wrote in a note to clients.
Paris-based Criteo fell as much as 16 percent, to $21.40 in intraday trading, before paring some of the losses, now down 11 percent. Criteo was de-certified because its customized integration no longer fit Facebook’s priorities, Terry wrote, lowering his price target to a Street low $24. However, he notes that Criteo expects to move to Facebook’s standard API over time.
Criteo downplayed the move, saying its integration with the Facebook platform and its ability to service advertisers hasn’t been impacted by the social-media goliath’s marketing partner badge removal. "Criteo has significant reach beyond Facebook, across the open web and mobile apps and is supply agnostic," spokeswoman Kenya Hayes said in an email.
A Keybanc analyst shrugged off the removal, saying it’s part of Facebook’s multiyear continuum to push its own solutions. "We do not believe Facebook’s decision will meaningfully change the trend of Criteo’s revenue derived from Facebook," analyst Andy Hargreaves wrote in a note. "And do not believe it will have any noticeable impact on Criteo’s business off of Facebook."
Criteo’s revenue on Facebook has gone from 9 percent of revenue in 2015 to 6 percent in 2017 and 4 percent in the second quarter, excluding traffic acquisition costs, Hargreaves wrote. The removal has no impact on KeyBanc’s revenue or earnings estimates, the analyst said. He recommends buying the stock.
"Facebook wants direct customer relationships and has been moving toward this in the re-targeting space over the last few years. As part of this, Facebook has been making it more difficult for Criteo to acquire inventory for several years," Hargreaves said.
Short-sellers have looked at Criteo’s sales with a skeptical eye. Last year, short seller Gotham City Research alleged that half of Criteo’s revenue originated from "suspect sources" like clickbots and "low quality" websites. That is double the rate of some peers, according to Gotham’s report. Criteo has short interest 6.21 percent of float, according to S3Partners data.
Despite the backlash, Criteo’s reputation on the Street is split with 12 bullish analysts and 12 neutral-rated. Before today’s tumble, Criteo shares were down 2.15 percent year-to-date.