Group 1 - The stock markets have seen a significant underperformance of small- and mid-cap stocks compared to large-cap stocks this year [1] - There is a general consensus among analysts regarding the trends affecting these stocks [1] Group 2 - Gary Alexander has extensive experience in covering technology companies and has been involved with seed-round startups [1] - He has been a contributor to Seeking Alpha since 2017 and has been quoted in various web publications [1]

Summary of Key Points from J.P. Morgan's US Internet 2026 Outlook Industry Overview - The report focuses on the **US Internet** sector, providing insights into market performance, macroeconomic factors, and company-specific forecasts for 2026. Core Insights and Arguments 1. **2025 Performance Recap**: - The internet sector outperformed the S&P 500 by 17% in 2025, with average performance across market caps showing significant variation: - Large Cap: +19% - Mid-Cap: +42% - Small Cap: +21% - Smaller Cap (<$2B): -16% [12][13] 2. **2026 Macro Outlook**: - J.P. Morgan economists estimate a **35% risk of recession** in 2026, with expectations of resilient global growth driven by fiscal stimulus and capital expenditure [19][23]. - Key economic indicators include: - GDP Growth: 1.8% in 2026 - Inflation: Expected to remain above 3% CPI - Unemployment: Projected to peak at 4.5% in Q1 2026 [21][19]. 3. **Investment Recommendations**: - **Top Picks for 2026** include: - Alphabet (Overweight, $385 PT): Growth driven by AI and cloud services [46]. - Amazon (Overweight, $305 PT): Expected growth in AWS and retail segments [51]. - DoorDash (Overweight, $300 PT): Anticipated GOV growth of 18% CAGR from 2025-2028 [57]. - Spotify (Overweight, $805 PT): Projected revenue growth driven by premium subscriptions [66]. 4. **AI and Cloud Growth**: - AI is expected to significantly drive cloud growth, with Google Cloud projected to grow in the mid-40% range and AWS adding the highest estimated revenue in 2026 [101][102]. - The report highlights the importance of AI in enhancing operational efficiencies and driving revenue growth across various sectors [78]. 5. **Valuation Metrics**: - The S&P 500 is projected to have a price target of **$7,500** by the end of 2026, suggesting a 9% upside [26]. - Internet companies are trading at an average of **10.2x 2027E EV/EBITDA**, with expected revenue growth of approximately **13% CAGR** from 2025 to 2027 [40]. Additional Important Insights 1. **Market Dynamics**: - The report discusses the competitive landscape in the AI space, noting that leading model developers like Google and OpenAI are pushing the frontier, but competition remains intense [89][94]. - The potential for AI-driven advertising and e-commerce growth is highlighted, with expectations for significant market share shifts in the online ad market [112]. 2. **Company-Specific Catalysts**: - Alphabet's AI tools are expected to enhance productivity and revenue, while Amazon's AWS is set to double its capacity by 2027 [56][88]. - DoorDash is focusing on expanding its marketplace and improving unit economics, while Spotify is ramping up its free cash flow and operating margins [60][68]. 3. **Key Questions for 2026**: - The report raises critical questions regarding AI monetization, the impact of AI on cloud growth, and the potential for disruption in various sectors, including travel and e-commerce [76][124]. This summary encapsulates the essential insights and projections for the US Internet sector as outlined in the J.P. Morgan report, providing a comprehensive overview of the anticipated trends and investment opportunities for 2026.

Group 1: Analyst Ratings and Price Targets - Morgan Stanley analyst Matthew Cost maintained a Hold rating on Criteo S.A. with a price target of $36.00, reflecting a cautious view on the company's near-term prospects despite operational improvements [1] - Stifel reaffirmed its Buy rating with a target of $42.00, highlighting Criteo's strong position to benefit from the growing agentic commerce trend and the importance of access to scaled retailer data [2] - BMO Capital lowered its price target from $51.00 to $40.00 while maintaining an Outperform rating, noting that Criteo's Contribution ex TAC and Adjusted EBITDA were about 2.5% and 25% above consensus [3] Group 2: Financial Performance - Criteo's third quarter 2025 results showed adjusted EPS of $1.31, exceeding forecasts by over 40%, with revenue reaching $470 million, significantly above estimates [3] - The company has a free cash flow yield of 21% and more cash than debt, indicating solid financial health [2] Group 3: Company Overview - Criteo S.A. is a global technology company providing marketing and monetization services across the open internet, utilizing its Criteo Shopper Graph to enhance client campaigns [4] - The company operates in various regions including North America, South America, Europe, the Middle East, Africa, and Asia Pacific, strengthening its role in digital advertising and commerce solutions [4]

Industry Overview - The Internet Software & Services industry is closely tied to the economy, with initial estimates declining due to concerns over tariffs, inflation, and interest rates, although the economy has remained relatively stable [1] - The industry is characterized by a diverse range of players, which leads to some dissonance, but overall valuations have decreased significantly, making it attractive for investors [4] Key Themes - Technology adoption is crucial for growth, with companies leveraging AI and cloud services to stay competitive, leading to increased demand for software and services [6] - The U.S. economy is performing better than expected, despite concerns about job growth and geopolitical tensions affecting oil prices and supply chains [6] - Subscription-based models are becoming more prevalent, providing stability and allowing companies to retain customers and adjust pricing as needed [7] Market Performance - The Zacks Internet – Software & Services Industry has outperformed the broader Zacks Computer and Technology Sector and the S&P 500, returning 33% over the past year compared to 27.6% and 16.3% respectively [11] - The industry is currently trading at a forward P/E ratio of 223.7X, which is slightly above its median level, indicating that shares are not overvalued on average [14] Company Highlights Criteo S.A. (CRTO) - Criteo operates a commerce media platform that connects advertisers with retailers and publishers, leveraging AI to enhance its services [16][20] - The company has maintained a client retention rate close to 90% and reported a 11% growth in Retail Media ex-TAC contributions [18][19] - Despite a challenging market, Criteo's shares have decreased by 53.5% over the past year, but earnings estimates for 2025 and 2026 have shown positive revisions [23] NetEase, Inc. (NTES) - NetEase is focused on online services, primarily in gaming, which is its largest revenue contributor, supported by a strong in-house R&D team [26][27] - The company has seen significant success with popular game titles and is expanding its international business with new content [28][29] - NetEase's shares have gained 59% over the past year, with positive earnings and revenue growth expected for 2025 and 2026 [29]

Group 1 - Criteo S.A. (CRTO) has a mixed reputation among internet advertisers, particularly due to its use of browser cookies for ad targeting, which has faced criticism from major companies like Apple [1] - In 2017, Apple publicly criticized Criteo's advertising practices, highlighting concerns over privacy and data usage [1] Group 2 - The article does not provide specific financial data or performance metrics related to Criteo S.A. [1]

Core Insights - Criteo S.A. (CRTO) has a mixed reputation among internet advertisers, particularly due to its use of browser cookies for ad targeting, which has drawn criticism from major companies like Apple [1]. Group 1: Company Overview - Criteo S.A. is known for its advertising technology, specifically in the realm of targeted advertising through browser cookies [1]. Group 2: Industry Context - The advertising industry is facing scrutiny over privacy concerns, with significant players like Apple taking a stand against practices such as those employed by Criteo [1].

Company Overview - Criteo S.A. is a global technology company specializing in digital advertising, focusing on personalized online display advertisements and utilizing data analytics to optimize ad performance [1] Recent Performance - Over the past 30 days, Criteo's stock has risen by approximately 8.84%, indicating strong investor confidence and positive market sentiment [2] - In the last 10 days, the stock experienced a slight decline of about 5.81%, which may present a strategic entry point for investors [2] Growth Potential - Criteo has an estimated stock price growth potential of 80.97%, driven by strategic initiatives and market positioning [3] - Analysts have set a target price of $39 for Criteo, suggesting substantial room for stock appreciation from current levels [5] Financial Health - Criteo's Piotroski Score is 8, reflecting strong financial health, profitability, leverage, liquidity, and operational efficiency [4][6] - The high Piotroski Score indicates that Criteo is well-managed and financially stable, making it an attractive investment option [4]

Core Insights - The emergence of generative AI models has led to a revolution in the marketing industry, with many entrepreneurs exploring AI-driven advertising and marketing solutions [1] - Criteo, a global e-commerce data service company, aims to leverage its data advantages to empower the Business Intelligence sector and assist Chinese companies in expanding internationally [1][4] - The concept of Agentic Commerce is gaining traction, allowing users to shop, compare, negotiate, and transact through AI agents [2][3] Company Overview - Criteo started as a movie recommendation engine and has evolved into a global e-commerce data service provider, currently serving 17,000 clients [1] - Criteo has maintained double-digit growth in China over the past three years, working with major clients such as Alibaba and Midea Group [1] - The company views China as a crucial market and aims to utilize AI capabilities to help Chinese enterprises go global [1] Industry Trends - The rise of AI agents in commerce is transforming consumer behavior, with 85% of surveyed users in the US and UK utilizing AI tools for shopping [3] - AI recommendations are particularly effective for high-frequency purchase items like clothing and electronics, while adoption rates for durable goods are lower [3] - Criteo's integration of AI models with e-commerce data aims to enhance the precision of consumer recommendations and reduce the likelihood of AI hallucinations [4] Recommendations for Retailers - Retailers are encouraged to adapt their services to align with the evolving consumer reliance on AI tools [5] - Companies should make timely decisions regarding participation in AI marketing to avoid losing competitive advantage [5]

Financial Performance - Revenue for Q3 2025 was $469.66 million, a 2% increase from $458.89 million in Q3 2024[17] - Gross profit for Q3 2025 reached $256.48 million, up from $231.93 million in Q3 2024, reflecting an increase of 10.6%[17] - Net income for Q3 2025 was $40.08 million, compared to $6.14 million in Q3 2024, representing a significant increase of 552%[17] - Criteo reported a net income of $103.008 million for the nine months ended September 30, 2025, compared to $42.769 million for the same period in 2024, representing a year-over-year increase of approximately 141%[24] - Net income attributable to shareholders for the nine months ended September 30, 2025, was $96.96 million, up from $40.48 million in the same period of 2024, indicating a strong performance[86] - Basic earnings per share for the nine months ended September 30, 2025, was $1.82, compared to $0.74 for the same period in 2024, showing substantial growth[86] - Total revenue for the nine months ended September 30, 2025, was $1.40 billion, an increase from $1.38 billion in the same period of 2024[98] Assets and Liabilities - Total current assets decreased to $1.01 billion as of September 30, 2025, down from $1.22 billion at the end of 2024[15] - Total liabilities decreased to $891.35 million as of September 30, 2025, compared to $1.19 billion at the end of 2024[15] - Cash and cash equivalents were $255.01 million as of September 30, 2025, down from $290.69 million at the end of 2024[15] - The company’s total assets decreased to $2.06 billion as of September 30, 2025, from $2.27 billion at the end of 2024[15] - Trade accounts receivables decreased to $592.14 million from $829.46 million at the end of 2024, with a net book value of $568.73 million[48] - Noncurrent assets as of September 30, 2025, totaled $286.35 million, an increase from $265.61 million as of December 31, 2024[100] Equity and Retained Earnings - Retained earnings increased to $661.50 million as of September 30, 2025, up from $571.74 million at the end of 2024[15] - Criteo's total equity as of September 30, 2025, was $1.170 billion, with a retained earnings balance of $661.496 million[22] - Total equity increased to $1.17 billion as of September 30, 2025, up from $1.08 billion at the end of 2024, an increase of 8.2%[15] Operating Expenses - Operating expenses for Q3 2025 totaled $204.85 million, a decrease from $222.33 million in Q3 2024[17] - Research and development expenses for Q3 2025 were $67.68 million, down from $85.29 million in Q3 2024, a reduction of 20.7%[17] - Total operating lease expense for the nine months ended September 30, 2025, was $27,086,000, down 13.5% from $31,467,000 in 2024[56] - Lease expense for the three months ended September 30, 2025, was $9,313,000, a decrease of 10.5% compared to $10,410,000 for the same period in 2024[56] Cash Flow - The company generated net cash provided by operating activities of $150.544 million for the nine months ended September 30, 2025, up from $88.707 million in the prior year, indicating a significant improvement in cash flow[24] - The company incurred a net cash used in investing activities of $69.123 million for the nine months ended September 30, 2025, compared to $58.966 million in the same period of 2024[24] - Criteo's cash and cash equivalents at the end of the period were $255.335 million, down from $283.990 million at the end of September 2024[24] Share Repurchase and Compensation - The board of directors authorized an extension of the share repurchase program to up to $805 million of the company's outstanding American Depositary Shares on January 31, 2025[22] - The company repurchased 3,643,186 shares at a weighted average price of $31.7, impacting the treasury stock balance[22] - Criteo's share-based compensation expense for the nine months ended September 30, 2025, was $52.037 million, down from $82.193 million in the previous year[24] - Total equity awards compensation expense for the nine months ended September 30, 2025, was $52,037,000, a decrease of 36.7% compared to $82,193,000 in 2024[62] Tax and Legal Matters - The provision for income taxes for the nine months ended September 30, 2025, was $27.7 million, compared to $15.0 million for the same period in 2024, reflecting a significant increase[84] - The company recognized a probable loss of $1.5 million related to a legal settlement in the third quarter of 2025[94] Segment Performance - Retail Media segment revenue reached $67.11 million, up 10% from $60.77 million in the same period last year[42] - Performance Media segment revenue was $402.55 million, slightly up from $398.13 million year-over-year[42] - Contribution ex-TAC for Q3 2025 was $288.13 million, a 8% increase compared to $266.10 million in Q3 2024[44] - Revenue from Retail Media for the three months ended September 30, 2025, was $67.11 million, up from $60.77 million in 2024, reflecting a growth of approximately 5.5%[98] - Revenue from Commerce Growth for the nine months ended September 30, 2025, was $1.13 billion, slightly up from $1.13 billion in 2024, indicating stable performance[98] Future Plans - The company plans to redomicile from France to Luxembourg, which is expected to replace its American Depositary Share structure with ordinary shares directly listed on Nasdaq[102]

Group 1 - Criteo's shares opened 8.7% higher following strong Q3 results and a relocation announcement [1][7] - Q3 contribution excluding traffic acquisition costs (ex-TAC) increased by 8% year over year to $288 million, while adjusted earnings rose 36% to $1.31 per diluted share, surpassing analyst expectations [2][7] - The company plans to relocate its corporate domicile from Paris to Luxembourg in 2026, with a potential future move to the U.S. [3][4] Group 2 - The move to Luxembourg aims to facilitate a direct listing on Nasdaq, enhancing stock tradeability in the U.S. market and potentially qualifying Criteo for S&P 500 inclusion [4][6] - Management believes that relocating could expand access to passive capital and broaden the shareholder base, as stated by CFO Sarah Glickman [6][7]