Morgan Stanley views Google's cookie news as neutral to possibly positive for LiveRamp
Shares of Criteo (CRTO) are under pressure on Wednesday after Google (GOOGL; GOOG) said yesterday that it plans to phase out third-party cookies in Chrome within two years. Commenting on the news, KeyBanc analyst Andy Hargreaves told investors that the risk to Criteo's stock is likely to persist as Google added a timeline for eliminating third-party cookies in Chrome, but did not detail what it intends to be a replacement. Voicing a similar opinion, his peer at SunTrust argued that the announcement prolongs the uncertainty for Criteo as opposed to resolving it.
GOOGLE PHASING OUT COOKIES IN CHROME: In a blog post on Tuesday, Google said that after initial dialogue with the web community, "we are confident that with continued iteration and feedback, privacy-preserving and open-standard mechanisms like the Privacy Sandbox can sustain a healthy, ad-supported web in a way that will render third-party cookies obsolete." It added that once these approaches have addressed the needs of users, publishers, and advertisers, and it has developed the tools to mitigate workarounds, "we plan to phase out support for third-party cookies in Chrome." The company further stated that it intends to do this within two years, adding that "We cannot get there alone, and that's why we need the ecosystem to engage on these proposals. We plan to start the first origin trials byw the end of this year, starting with conversion measurement and following with personalization."
RISK TO CRITEO STOCK TO PERSIST: Google's blog post on Tuesday added a timeline for eliminating third-party cookies in Chrome, but did not detail what it intends to be a replacement, KeyBanc analyst Andy Hargreaves told investors in a research note. The analyst pointed out that he continues to believe the most likely outcome includes a purpose-built identifier for advertisers similar to what exists in Apple (AAPL) and Google's app ecosystems. However, this will remain unclear for the foreseeable future, which suggests the risk to Criteo's stock is likely to persist, the analyst contended. Hargreaves kept a Sector Weight rating on Criteo shares.
Also commenting on Google's announcement, SunTrust analyst Matthew Thornton said that while Criteo has been "aggressively shifting to non-cookie based identifiers" and has two more years to transition, the news prolongs the uncertainty as opposed to resolving it. Thornton expects Criteo to work closely with Google to prepare for the transition, and awaits a public response from Criteo following the Google announcement. The analyst maintained a Buy rating and $25 price target on Criteo shares.
Additionally, SunTrust's Thornton said he sees less, if any, potential disruption/uncertainty" for Rubicon (RUBI), and feels that the company's pending merger with Telaria (TLRA) "further cushions any impact." The analyst maintained a Buy rating and $10 price target on Rubicon.
NEUTRAL TO POSITIVE FOR LIVERAMP: After Google announced yesterday that its plan to remove support for third party cookies from Chrome within the next two years, Morgan Stanley analyst Stan Zlotsky said he views the announcement as "a broader message to the advertising industry for further collaboration in creating a more privacy-centric web." Within that context, he views the announcement as at least a net neutral, and potentially a positive, for LiveRamp (RAMP) as the news puts a potential timeline on a resolution and a move to decreased reliance on third party cookies has long been priced into the shares. Also, an end to third party cookies would likely serve as a tailwind to LiveRamp's Authenticated Traffic Solution, Zlotsky added. He kept an Overweight rating and a $64 price target on LiveRamp's shares.
PRICE ACTION: In Wednesday morning trading, shares of Criteo have dropped almost 5% to $14.56 after having slid on Tuesday as well.