Outbrain Stock Plummets 39% in 3 Months: Should You Buy the Dip?

Core Viewpoint - Outbrain Inc. (OB) shares have significantly underperformed, dropping 39.2% over the past three months, contrasting with the 8.1% decline in its industry and the 7.5% fall in the Zacks S&P 500 Composite [1][4]. Group 1: Performance Comparison - Outbrain's performance is notably worse than its industry peers, Amadeus IT Group, S.A. (AMADY) and Katapult Holdings, Inc. (KPLT), which have seen gains of 10.5% and 72.6% respectively over the same period [4]. Group 2: Strategic Acquisitions and Partnerships - The acquisition of Teads enhances Outbrain's global reach, leveraging over 50 partnerships with premium brands like Apple, Visa, and McDonald's, which generate $5-$20 million annually on average [5][6]. - Outbrain is focusing on strengthening its relationships with premium media owners, renewing agreements with key partners in various countries and securing new partnerships [7][8]. Group 3: AI Integration and Customer Engagement - Over 70% of Outbrain's customer base utilized its AI-based Creative Automation suite in Q4 2024, which optimizes customer engagement through predictive insights [9][10]. - The anticipated increase in AI usage is expected to expand Outbrain's customer base by enhancing efficiency and results [10]. Group 4: Valuation and Financial Prospects - Outbrain shares are currently undervalued, trading at 9.9 times forward 12-month earnings per share, significantly lower than the industry average of 37.4 times [11]. - The trailing 12-month EV-to-EBITDA ratio for Outbrain is 3.8 times, well below the industry average of 41 times [13]. - The Zacks Consensus Estimate projects Outbrain's 2025 revenues at $600.2 million, indicating over 100% year-over-year growth, with earnings expected to turn around to 36 cents per share from a loss in the previous year [16]. Group 5: Liquidity Position - Outbrain's current ratio stands at 1.2, which, while lower than the industry average of 2.1, still indicates the company can manage its short-term debt obligations [17]. Group 6: Investment Recommendation - Given Outbrain's extensive global reach, strategic acquisitions, strong partnerships, commitment to AI, and favorable liquidity position, it is considered an opportune time for investors to buy the stock to leverage its long-term growth potential [18][19].