TechTarget Inc. (TTGT), Mid/Small Cap AI Study of the Week

TechTarget Inc. (TTGT), Mid/Small Cap AI Study of the Week

May 9nd, 2024

Weekly AI Pick from the Mid & Small Cap S&P 400 & S&P 600

Company Overview

TechTarget Inc. (TTGT) is a B2B marketing firm that specializes in providing targeted marketing and sales data to enterprise technology decision-makers. They offer a variety of services, including their IT Deal Alert™ suite, which helps vendors identify potential buyers. The company boasts over 31.8 million registered users and provided marketing services to around 2,600 customers in 2023. TechTarget's platforms, such as BrightTALK, facilitate webinars and virtual events, generating leads through content and community growth. They focus on content-driven marketing, advanced analytics, and intend to enhance their products to meet evolving customer needs.

TechTarget operates in various IT sectors, offering content on server management, enterprise desktop computing, AI, data management, and business applications like ERP and CRM. They also cater to IT channel professionals, such as managed service providers and systems integrators. With a recent merger agreement with Informa PLC, TechTarget will form a new entity, with Informa holding a 57% stake. The company is navigating macroeconomic challenges, such as inflation and geopolitical issues, by reducing its workforce by 5% for cost savings. Despite these challenges, TechTarget is positioned to benefit from trends in data-driven sales and marketing, and they are expanding internationally with properties in the UK, France, and other regions. They are also focusing on subscription-based services for stable revenue streams and planning to grow through acquisitions and launching websites in various languages.

By the Numbers

  • Annual 10-K Report Summary:
    • Membership increase: 31.8 million in 2023, up from 30.2 million in 2022.
    • Total revenues: $230.0 million in 2023, a 23% decrease from the previous year.
    • Priority Engine product revenues: $49.4 million in 2023, a 29% decline.
    • Gross profit: Decreased by $64.6 million in 2023.
    • Gross profit percentage: Decreased to 67% in 2023.
    • Revenue decline: North America 19%, International 29%.
    • Legacy global customer spending: Decreased by 19%.
    • Other customer spending: Decreased by 24%.
    • Net income: $4,461 thousand in 2023, down from $41,609 thousand in the previous year.
    • Provision for income taxes: Decreased by 38% to $9,958 thousand in 2023.
    • New customers added: Approximately 800 in 2023.
    • Customer count decrease: 24%, leading to a revenue shortfall of approximately $103.8 million.
    • Gross profit: Decreased by 29% to $154,426 thousand in 2023.
    • Total operating expenses: Decreased by 3%, or $5,612 thousand.
    • Capitalization for internal-use software and website applications: Increased from $11.5 million in 2021 to $14.2 million in 2023.
  • Quarterly 10-Q Report Summary:
    • Revenue decrease (nine months ended September 30, 2023): 23%, or $51.8 million less than the previous year.
    • International revenue fall: 30%.
    • Gross profit drop: $49.0 million.
    • Gross profit percentage: Decreased from 74% in 2022 to 68% in 2023.
    • Revenue decrease (quarter ended September 30, 2023): 26% to $57,128 thousand.
    • Revenue decrease (nine-month period): 23% to $172,671 thousand.
    • North American market revenue decline: 19% to 21%.
    • International segments revenue drop: 30% to 35%.
    • Longer-term contracts: Now 36% of total revenue.
    • Adjusted Revenue (non-GAAP measure): $57,128 thousand for the quarter and $226,129 thousand for the nine-month period.
    • Revenue decrease (third quarter of 2023): $20.3 million year-over-year.
    • New customer revenue (third quarter of 2023): $7.3 million.
    • Existing customer spend decrease (third quarter of 2023): $27.6 million.
    • Gross profit decline (third quarter of 2023): $19.5 million.
    • Gross profit percentage drop (third quarter of 2023): From 74% to 67%.
    • Operating expenses decrease (third quarter of 2023): $1.6 million.
    • Provision for income taxes increase (third quarter of 2023): $3.1 million.
    • Interest and other income improvement (third quarter of 2023): $2.9 million due to gain from debt extinguishment.
    • Cash and cash equivalents decline: Due to stock repurchases and debt repurchases.
    • Gain from debt extinguishment (nine months): $5.0 million.

Stock Performance and Technical Analysis

Based on the technical data provided, the stock is exhibiting mixed signals, which could indicate a period of consolidation or an upcoming trend reversal. The stock's current price of $28.46 is 20% above its 52-week low, suggesting that it has found some support above its lowest price in the past year. However, being 28% below its 52-week high also signals that the stock has retreated significantly from its peak, which could be a cause for concern among investors who are wary of stocks that have lost a significant portion of their value.

Volume analysis shows daily trading volumes are below the longer-term average, which indicates a lack of enthusiasm from the market participants. This lower volume could mean that any price movement is not strongly supported and may not be sustainable. The relatively stable price over the last month might suggest that the stock is finding a base or that market participants are in a wait-and-see mode. However, the 18.75% drop over the last three months cannot be overlooked, as it implies a bearish trend.

The Money Flow indicators and the MACD (Moving Average Convergence Divergence) further paint a bearish picture. Moderate selling pressure and indications of distribution suggest that more investors are looking to sell their shares than buy, which can drive the price down. A bearish MACD value of -0.84 confirms this negative momentum, indicating that the short-term moving average of the stock's price is below the long-term moving average, which often signals a sell.

Overall, the technical analysis suggests caution. The bearish indicators such as the MACD, money flow, and recent price decline overshadow the fact that the stock is above its 52-week low. Investors should consider additional factors such as the company's fundamentals, sector performance, and broader market trends before making an investment decision. Given the current technicals, a conservative approach would be to monitor the stock for signs of a stronger bullish reversal before considering a long position.

The ‘Bull’ Perspective


  1. Resilience in the Face of Adversity: Despite a 23% decrease in revenue, TechTarget has shown resilience by growing its Adjusted Revenue, a non-GAAP measure, after adjustments.
  2. Strategic Positioning in B2B Niche: TechTarget's specialized focus on B2B technology markets positions it well for a rebound as tech spending recovers.
  3. Cost Control and Operational Efficiency: The company's recent cost-cutting measures, including headcount reduction and controlled discretionary spending, are set to improve operational efficiency.
  4. Growth Potential from Informa Tech Acquisition: The proposed transaction with Informa Tech could provide significant growth opportunities and synergies.
  5. Broadening Market Leadership Beyond Tech: Diversification and broadening market leadership offer a buffer against tech sector volatility.


  1. Resilience in the Face of Adversity:
    Despite the headwinds faced by TechTarget, evidenced by a 23% revenue decrease, the company's Adjusted Revenue tells a different story. With $57,128 thousand for the quarter and $226,129 thousand for the nine-month period, Adjusted Revenue demonstrates the company's underlying strength. This resilience is crucial in the current economic climate, where the tech sector is particularly volatile. Moreover, TechTarget's gain from the early extinguishment of debt and its adept navigation through a difficult macroeconomic environment signal a strategic financial management that is essential for long-term stability and growth.
  2. Strategic Positioning in B2B Niche:
    TechTarget operates within a niche that, while currently experiencing a downturn, is poised for recovery. With a focus on targeted content and purchase intent data products for B2B technology companies, TTGT is well-positioned to capitalize on the inevitable upturn in tech spending. As companies resume normal operations and scale up their technology investments, TechTarget's suite of services, including IT Deal Alert™ with Priority Engine™ and Qualified Sales Opportunities™, will be in high demand.
  3. Cost Control and Operational Efficiency:
    The company's proactive approach to managing its cost structure through headcount reductions and tight control over discretionary spending is commendable. These difficult decisions are often necessary to maintain financial health and position a company for profitability when market conditions improve. By streamlining operations now, TechTarget is setting itself up for a more agile response to market opportunities, which can translate into enhanced shareholder value.
  4. Growth Potential from Informa Tech Acquisition:
    The proposed transaction with Informa Tech represents a strategic move that could unlock significant growth potential for TechTarget. By combining resources and expertise, TTGT is likely to realize operational synergies that can lead to cost savings and revenue growth. The acquisition could expand TechTarget's reach and enhance its product offerings, which is crucial for staying competitive in the ever-evolving B2B tech landscape.
  5. Broadening Market Leadership Beyond Tech:
    The recent market shifts, with leadership broadening beyond the tech sector to include cyclicals and defensives, underscore the importance of diversification. TechTarget's ability to cater to a broad array of technology-related needs puts it in a favorable position to weather sector-specific downturns. As the company continues to diversify its offerings and expand its client base, it will likely become less susceptible to the whims of the tech sector, providing a more stable revenue stream.

In light of the recent challenges, TechTarget Inc. (TTGT) remains a compelling buy for investors looking for a resilient player in the B2B technology space. The company's ability to grow Adjusted Revenue amidst a revenue dip, its strategic niche focus, cost control measures, potential growth from the Informa Tech acquisition, and broadening market leadership all contribute to a strong investment thesis. While the risks are non-negligible, the company's proactive management and strategic positioning bode well for its ability to navigate through and capitalize on the evolving market dynamics.

The ‘Bear’ Perspective


  1. Revenue and Profit Decline: TechTarget's revenue has seen a significant 23% decrease, with gross profit also taking a substantial hit, plummeting by $49.0 million.
  2. Market Conditions and Competition: The tech sector is experiencing layoffs and economic uncertainty, which could further dampen TechTarget's performance in a highly competitive market.
  3. International Weakness: International revenue has dropped by 30%, indicating vulnerability in global markets which contribute to a third of TTGT's total revenues.
  4. Operational Risks and Cost Pressures: The company is grappling with increased operating costs, particularly in personnel expenses, and the need for continuous investment in technology and content.
  5. Macro and Regulatory Challenges: The broader economic environment, including inflation and potential changes in Fed policy, along with evolving privacy laws, could negatively impact TTGT's business model.


  1. Revenue and Profit Decline:
    TechTarget's financials have raised red flags for investors, with its latest quarterly report revealing a startling 23% drop in revenue, which translates to $51.8 million less than the previous year. This downtrend is not just a blip but a significant erosion of the company's top line, which is critical for future growth. The gross profit's nosedive by $49.0 million and the shrinking gross profit percentage from 74% to 68% are clear indicators of diminishing efficiency and profitability. In the face of such figures, investing in TTGT becomes a questionable proposition, as the company's ability to reverse this decline remains uncertain.
  2. Market Conditions and Competition:
    The current economic headwinds, including layoffs across the tech industry, spell trouble for B2B-focused companies like TechTarget. A reduction in customer spending and shorter contract durations have already manifested in TTGT's financial performance. With competition for marketing dollars intensifying, TechTarget's reliance on innovation and brand awareness to maintain its market share becomes a high-stakes gamble. In a sector where players are constantly jostling for a lead, TTGT's recent performance does not inspire confidence for it to come out ahead.
  3. International Weakness:
    The international segment, accounting for 33% of TechTarget's revenues, has suffered a severe 30% revenue contraction. This vulnerability to international market conditions exposes the company to risks beyond its control, such as local competition, regulatory changes, and currency fluctuations. As global economic pressures mount, the potential for further declines in this area could significantly impact TechTarget's bottom line. The stark numbers underscore the company's challenges in maintaining a strong global presence.
  4. Operational Risks and Cost Pressures:
    Rising operating costs, especially those tied to personnel, are squeezing TechTarget's margins. The company's need to invest in technology and content to stay relevant adds to the financial strain. With the amortization of intangible assets and the recording of net interest expenses, TTGT's operational efficiency is under the microscope. Investors should be wary of the company's increasing costs in the face of declining revenues, questioning the sustainability of its current business model.
  5. Macro and Regulatory Challenges:
    The broader economic context, including a potential shift in Fed policy due to sticky inflation, could further complicate TechTarget's recovery. Higher interest rates and a tightening monetary environment may affect customer spending and, consequently, TTGT's advertising revenue. Additionally, evolving privacy laws, particularly in significant markets like California, pose compliance risks and could limit TechTarget's data-driven marketing services. These macro and regulatory challenges, coupled with the company's internal struggles, present a daunting landscape for potential investors.

In conclusion, while every stock has its bulls and bears, the bearish case for TechTarget Inc. is currently supported by a confluence of declining financial performance, challenging market conditions, international revenue weakness, operational risks, and macroeconomic and regulatory headwinds. Prudent investors may find it difficult to overlook these concerns, which are reflected not only in the company's numbers but also in the broader context of its operating environment.