Truecaller stock rating downgraded by Deutsche Bank on ad revenue concerns

Deutsche Bank downgraded Truecaller AB (SS:TRUEB) from Buy to Hold, lowering its price target to SEK69.00 from SEK90.00, due to significant concerns over the company's advertising revenue performance. The downgrade follows a reported 5% year-over-year decline in advertising revenue per Daily Active User (DAU) in Q2 FY25 and 6% in H1 FY25 on a constant currency basis, which contradicts Truecaller's assertion of a stable underlying ads market and is expected to undermine investor confidence in future ad revenue prospects.

Analysis

Deutsche Bank has downgraded Truecaller AB (TRUEB) from Buy to Hold and reduced its price target to SEK69.00 from SEK90.00, citing material concerns over the company's advertising revenue performance. The downgrade is underpinned by a notable decline in monetization, specifically a 5% year-over-year drop in advertising revenue per Daily Active User (DAU) in Q2 FY25 and a 6% decline in H1 FY25, calculated on a constant currency basis. Crucially, the analyst highlights a significant contradiction between these deteriorating metrics and Truecaller's management commentary, which described the underlying ad market as 'quite stable.' This discrepancy is seen as a key risk, as it is likely to undermine investor confidence in the company's future ad revenue guidance and overall narrative. The situation is further compounded by the company facing significant foreign exchange headwinds, adding another layer of pressure to its near-term financial outlook.

Key Decisions for Investors

• Investors should re-evaluate their thesis on Truecaller, as the disconnect between declining ad monetization metrics and management's 'stable market' commentary raises questions about visibility and credibility.
• Monitor subsequent earnings calls closely for stabilization or improvement in ad revenue per DAU and for management's clarification on market dynamics to gauge if the current weakness is transient or structural.
• Consider the new, lowered price target of SEK69.00 as a revised valuation benchmark, factoring in the dual headwinds of weakening core ad performance and adverse foreign exchange impacts.