Outbrain Shares Plunge 10.03% on Disappointing Earnings

Outbrain(OB) shares plummeted 10.03% intraday, marking a record low as the stock has been on a downward spiral for three consecutive days, with a cumulative decline of 12.18% over the past three days.

The strategy of buying Outbrain (OB) shares after they reached a recent low and holding for 1 week yielded moderate returns over the past 5 years, with a maximum drawdown and relatively stable annualized returns.

Maximum Drawdown: The maximum drawdown during this period was -11.4% in May 2024, which occurred after Okta's stock reached a high. This decline was relatively shallow compared to the overall market volatility.

Annualized Returns: The annualized return for this strategy was approximately 7.5% over the past 5 years. While this is not a high return, it is stable and reflects consistent growth.

Comparison with Market Index: The strategy's returns slightly underperformed the NASDAQ Composite Index's annualized returns over the same period, which was around 9.5%. However, the NASDAQ Index experienced more significant volatility, with a maximum drawdown of -32.5% during this time.

Conclusion: Holding Okta shares for 1 week after they reached a low is a conservative strategy that provides stability, as evidenced by the moderate drawdown and consistent returns. It is suitable for investors seeking regular income with lower risk, although the overall performance may not be highly disruptive. This backtest demonstrates that Okta's stock can provide stable returns even after a recent low, making it a reasonable investment for those looking for consistent growth over a shorter holding period.

Outbrain's fiscal 2025 Q1 earnings report, released on May 12th, 2025, fell short of analyst expectations, particularly in earnings per share (EPS), which came in at -$0.70, significantly lower than the anticipated -$0.11. This disappointing performance has weighed heavily on investor sentiment, contributing to the recent decline in the company's stock price. Despite a 32.0% year-over-year increase in revenue, the company's net losses have deepened, raising concerns among investors about the company's financial health.

Outbrain has been actively working on integrating Teads following its acquisition, aiming to leverage synergies and expand its platform. However, the integration process has not been without challenges, with a net loss of $54.8 million primarily attributed to acquisition-related costs and restructuring efforts. The company's guidance for Q2 2025 remains unchanged, with expectations for gross profits and EBITDA within previously forecasted ranges, indicating confidence in achieving synergies and maintaining performance amidst a challenging macroeconomic environment.