Criteo Dives On Q3 Miss

Criteo Dives On Q3 Miss, Q4 View Amid Apple Ad Block

Criteo (NASDAQ:CRTO) stock dove on Wednesday after the Paris-based ad-tech firm gave Q3 earnings and Q4 guidance below Wall Street’s expectations before the market open.

http://news.investors.com/110415-779112-criteo-q3-earnings.h…

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Scanning the results, two things.

The bottom line was affected by this:

primarily as a result of a negative financial income and an exceptionally high effective tax rate in the third quarter 2015. Our financial income was negatively impacted by an exceptionally strong fall in the value of the Brazilian Real against the euro in the third quarter, translating into a non-cash foreign exchange loss on our intragroup position with our Brazilian subsidiary.

On the balance sheet, the ‘financial income’ was minus 5.9 million euros. Effectively halving the net income. In the same quarter last year, this was a positive 5 million, effectively doubling the net income then. Can someone with better understanding of this explain how big a deal is this? This ‘financial income’ line… Last year + 5 mil, this year minus 5 mil.

Operating expenses in the third quarter 2015 increased by 50% to €88 million compared with the third quarter 2014. Operating expenses in the third quarter 2015, excluding the impact of share-based compensation expense, pension costs, depreciation and amortization and acquisition-related deferred price consideration, which we refer to as Non-IFRS Operating Expenses, were €81 million, an increase of 54% compared with the third quarter 2014. This increase is primarily related to headcount growth in Research & Development (56% year-over year) and Sales & Operations (44% year-over-year), as we continued to scale the organization. We intend to continue to invest into Research & Development and Sales & Operations in the fourth quarter of 2015 to support our current and anticipated future growth.

Well this was expected. They told us so. That’s one of the reasons why Saul dropped CRTO I believe. He wanted to put his money to better use on companies increasing their EPS, not sacrificing EPS now for whatever reason on the promise of an increased EPS later. I wonder if you could have predicted this drop? In hindsight, was it obvious?

I’m still in. Ad-blocking doesn’t appear to have affected their revenue. Everything but the bottom line looks great…except only the bottom line matters.

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AT first I liked this company with the revenues, although I did feel similar to the sketchiness I felt with some biotechs given the drug pricing isues and stuff. I mean, I hate ads, and I hate targeted ads even more because most of them are horribly targeted. And I don’t want to give up the privacy to possibly help improve their targeting. It almost felt like a moral conflict investing in them.

I sold out around when that AAPL ad blocking stuff came up. I think there are better opportunities in spaces that won’t be the red headed stepchild of internet and technology stocks.

I’m still in. Ad-blocking doesn’t appear to have affected their revenue. Everything but the bottom line looks great…except only the bottom line matters.

I only had a small feeler position. I closed it yesterday with a 17% loss. There are better places for my money, although I haven’t decided exactly where that’s going to be yet.