By Sam Boughedda
Taboola (NASDAQ:TBLA) shares surged Monday after the company announced it has entered into a 30-year, exclusive commercial agreement with Yahoo.
The deal will see Taboola exclusively power native advertising across all of Yahoo's digital properties and will be available to buy through the Yahoo DSP, generating approximately $1 billion in annual revenue. It will also see Yahoo take a nearly 25% stake in Taboola.
The agreement is expected to close in the first quarter of 2023.
Taboola shares are currently up 51% at $2.79 per share after initially hitting a high of $3.27 per share at the start of Monday's session. Even so, it is still some way off its more than $15 per share highs achieved in 2021.
Following the announcement of the deal, Needham & Company analysts listed some key investment positives of the Yahoo deal for Taboola, which included a large upside to the scale of ad units for sale by Taboola, new Yahoo advertisers, and incremental ad demand for Taboola's DSP and margin expansion upside from its much larger revenue scale.
"Apollo will take a board seat and have a meaningful equity share of TBLA, implying to us that Apollo may use TBLA as its public equity to amass more AdTech companies, or may buy TBLA for its tech stack and management team," wrote the analysts, who have a Buy rating and $2.50 price target on Taboola. Yahoo is owned by funds managed by affiliates of Apollo.
"Data signals should improve materially with the addition of Yahoo's ad inventory, which should improve all of TBLA's recommendations and click-through rates (TBLA only gets paid for clicks)," they added.