Criteo: A Contrarian Play for People Who Like Money

Criteo is a cash machine. The market is pricing in that it's going away tomorrow. I have 12k shares at a 19.15 cost basis because I really like it, and I would buy more if I was okay with my entire portfolio being a single small-cap stock. End of post. \------------------------------------------------------------------------- Criteo is a French ad-tech company listed through an ADR on the Nasdaq. The core numbers are a P/E ratio of 6.38 and a P/B of 0.85, a market cap of slightly under 1B, and a share price of a little over 19 dollars today. That's really cheap, right? Why is this company trading under book? Did I mention that it also has no leverage? And a cash position of 300M USD? **ONE-THIRD OF THE SHARE PRICE IS IN ON THE BOOKS CASH.** *So, what does Critter or whatever, actually do?* Criteo is two businesses. Combined they generate nearly 2 billion in revenue, but it's worth knowing what each one does. The first is what they're most known for, 'retargeting', or buying up ad space on a lot of sites and using proprietary data on consumers to show them personalized ads. They sell this to businesses in an auction format. This is called "performance media" and generates roughly 1.7 billion in revenue and has around 53% gross margins. They've been improving margins on this segment from (40%-ish a few years back), but growth is stagnant and likely expected to decline. The second is retail media, or running advertiser auctions for products on major retailers' websites. Think companies like Best Buy, Costco, CVS, Macy’s and Kohl’s. This segment is worth roughly 200M but has **98% margin and grows at roughly 10% annually.** \------------------------------------------------------------------------------------ These are strong numbers. Let's talk about the bear case. The bear case is their legacy retargeting business not just stagnates but actively begins to shrink. Retailers also move more of retail media in-house (as Target just did, recently). There's also Amazon aggressively squeezing out more of the market. And maybe AI eats them, or something. All this despite growing margins in their legacy retargeting business and relative stability. And trading at 1/5th the P/E of The Trade Desk (TTD), a major competitor which people are tossing around as a "value" name. I'll let you do your own DCF, but think about what negative growth rates you'd need to neutralize the sheer amount of cash this business generates. \------------------------------------------------------------------------------------ How about a bull case? [Criteo Introduces Agentic Commerce Recommendation Service to Power AI Shopping Assistants](https://www.prnewswire.com/news-releases/criteo-introduces-agentic-commerce-recommendation-service-to-power-ai-shopping-assistants-302679859.html) Why it's up slightly, today. They're expanding AI inference and MCP integrations to their entire proprietary shopping graph. That's a lot of potential. The market seems to think this company is incapable of innovating or avoiding being eaten. It's also planning on redomiciling to Luxembourg this month. That means that it can directly list on the Nasdaq, instead of needing an ADR. **That means it can be included in the Russell 2000 and be tracked by passive index funds. Management is explicit about their intentions.** \-------------------------------------------------------------------------------------- There's so much to love about this company. But, in short, you're getting a company with a massive amount of on-the-books cash, a ridiculously cheap P/E ratio relative to high-flying peers, optionality on AI growth, a near-term catalyst from passive flows, and so much more. Historically, Criteo has been a bit of a value trap. That's why it's down/flat over the past five years. But, there's a lot of tailwinds to make the next five years different, or at least let you harvest a lot of cash from a stable to mildly declining business. That's why I have 12k shares. Make your own decisions. This isn't financial advice.