In the dynamic world of adtech, news of a company outpacing its projected earnings is a rejuvenating sign for the rest of the sector. Last Friday, Perion Network (PERI) — a global advertising technology firm — delivered just that, announcing preliminary results for the second quarter of 2023 that outshone consensus estimates and rekindled enthusiasm in the market.

The news helped PERI stock gain more than 4% on the day. The actual results are slated to be reported on Aug. 2. The share price is up more than 90% in the last 12 months.

The company expects $176 million in revenue, a year-on-year increase of 20% ahead of the Street’s estimate of around $171 million. Perion’s underlying profits, which are measured by adjusted EBITDA, are also expected to soar, by 40%, to reach $40 million, significantly surpassing the Street’s $34.3 million forecast.

As illustrated on Fintel’s earnings analysis page for PERI stock, the Tel Aviv-based firm has a track record of beating expectations in most of its reports.

 

The adtech firm credited its impressive second quarter to “positive market indications,” a signal that should serve as a buoyant wind for the rest of the industry. The improved ad market dynamics, which have been strengthening each month of the quarter, seem to be bearing fruit for leading players such as Perion.

Management Turnover

Since the September 2016 exit of then-CEO Josef Mandelbaum, Perion’s C-suite has seen more than its share of management and board turnover.

Nearly seven years and several CEOs later, incoming CEO Tal Jacobson was quoted in the statement as describing the preliminary results as an endorsement of “our diversified and scalable business model, and the power of our executional agility.” said Tal Jacobson, Perion’s incoming CEO.

Perion’s preliminary figures also indicate a robust contribution from its Search segment, revealing a surge in daily searches and an expanding pool of publishers. Detailed Key Performance Indicators (KPIs) will be announced in the company’s Aug. 2 report.

Strong Fund Support

Fintel’s analysis of PERI shows strong support from institutions that have been driving the share price higher. During the most recent quarter, the number of institutions on the register grew by 25.8% to a total of 301, with 288 holding long-only positions.

The average portfolio allocation has also grown by 0.38% during the quarter, driven by a rising share price.

 

Despite these bullish indicators, Perion has refrained from updating its full-year expectations for 2023, a common practice for the company, which last year announced similar revenue and EBITDA beats without altering its full-year guidance.

Analysts, however, expect this stance to change on Aug. 2 when the company hosts its financial results call, with the debut of new CEO Jacobson. In last week’s preview, he said, “Our continued momentum, technological innovation, and market fit are proving instrumental in achieving improved margins and market share gains.”

While the company’s strong performance has led to a modest 12% rise in its shares in the last five sessions, industry analysts are predicting even more substantial gains in the future.

Shots from Short Seller

To be sure, short seller Spruce Point Capital Management doesn’t have confidence in PERI stock. On May 23, it disclosed a short position and said it has concerns about the accuracy of the technology firm’s financial reporting.

The short sell said the shares could fall up to 40% over the long term due to several factors, including what it described as “extreme dependency” on a Microsoft (MSFT) search partnership due to expire next year.

In its annual filing for the 2022 year end, Perion had said the Microsoft agreement accounted for 35% of its revenue and that its potential loss was among the major risk factors.

“We have concerns about the accuracy of its financial reporting, efficacy of its product suite, and the sustainability of its growth,” the New York-based short-seller said.

The company fired back with a statement that “Perion is a highly regulated Nasdaq company that makes all required disclosures and takes all compliance measures.”

Analyst View

Oppenheimer analyst Jason Helfstein raised his target price to $44 from $42 per share to support his ‘outperform’ call on PERI stock following the update. Helfstein believes the revenue upside was most likely driven by search strength from the partnership with Microsoft’s Bing with benefits from ChatGPT integration.

Fintel’s consensus target price of $39.59 suggests the market thinks the stock could rise 19% over the next year.

Though Perion’s performance might not be strictly indicative of the entire adtech sector due to its unique position in the industry, its rising tide should certainly uplift spirits. As macroeconomic worries around the space appear to ease, the adtech industry is anticipated to benefit from a cautiously optimistic outlook.

Perion’s exceptional preliminary results offer a glimmer of what could be a prosperous year for the adtech industry. As companies continue to navigate the evolving digital advertising landscape, these early indicators serve as a promising testament to resilience, innovation, and strategic agility in the face of market fluctuations.

This article originally appeared on Fintel

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