Is Magnite Stock The Best Ad-Tech Stock To Buy Now?
Ad-tech stocks have been one of Wall Street’s favorites in 2020. Amid fears of an economic recession and the volatility of the stock market, as a result, ad-tech companies are somehow enjoying the ride. For instance, The Trade Desk (NASDAQ: TTD) has been one of the big winners on the stock market in the past year. Shares of the cloud-based ad-tech company tripled in 2020. The strong gains came as the company benefited from the opportunity in the Connected TV (CTV) space. And investors know that, of course. However, Trade Desk isn’t the only ad-tech stock that skyrocketed in the past year. Roku (NASDAQ: ROKU), the streaming device maker, is also getting tailwinds from CTV after acquiring Dataxu. However, after such a massive run in its stock price, one may be wary about buying the stock.
Fret not, chasing the high price tag of these top ad-tech stocks need not be the only game in town. Magnite (NASDAQ: MGNI), the world’s largest independent sell-side ad-tech platform may be one of the best stocks to buy now if you are bullish on the ad-tech space. For starters, the company was created from the merger of Rubicon Project and Telaria, which closed in early 2020.
Since the company’s formation, it has created a leading supply-side platform (SSP) for advertisers. Like The Trade Desk, the company is also expecting strong CTV growth as cord-cutting is taking place at an unprecedented pace. More importantly, its targeted advertising business is booming.
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Improving Financials Makes A Bullish Case For MGNI Stock
From the company’s most recent quarter, the company raked in $60.98 million in revenue. For the most part, it saw a 51% rise in connected TV revenue year-over-year. The reason for this could lie behind the massive rise in internet video streaming content this year. In turn, it creates a scenario whereby content producers could be relying on Magnite more to monetize their content. Ultimately, this sets up the stage for Magnite in a world dominated by streaming services.
Magnite expects its fourth-quarter revenue to be in the range of $72 million to $75 million. That represents a growth of between 18% and 23% quarter-on-quarter. The company also expects adjusted EBITDA margin to reach approximately 30%. That’s a sizable jump from the 23% figure it achieved in Q3 2020. Analysts are expecting Magnite’s revenue to rise by 37% this year. They also expect the company to generate non-GAAP earnings per share of $0.01 this year. The company could be on track to record more sustainable earnings going forward.
Ad-tech is not exactly something that is visible. What the company does is mostly behind the scenes. So, I don’t blame you if you’ve not come across the company. But that doesn’t mean it has no potential. In fact, the company has built strong relationships with digital publishers, giving them access to tap on several channels from a single platform. For instance, in early December 2020, the company announced a collaboration with Crackle Plus, a Chicken Soup for the Soul Entertainment (NASDAQ: CSSE) company and the operator of streaming services Crackle and Popcornflix. Crackle Plus is leveraging Magnite’s platform to better understand the bidding and buying behavior of ad buyers.
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Strong Analysts Ratings On MGNI Stock
The ad-tech company got votes of confidence from stock analysts, prompting greater interest in the stock. Earlier this week, there was a bullish commentary from Susquehanna analyst Shyam Patil. He believes it is one of the companies that is well-positioned to thrive in the CTV space. The surge in stock price on Thursday has also exceeded Needham analyst Laura Martin’s price target of $30. Martin compared Magnite to its equivalent on the other side of the programmatic advertising space, demand-side platform The Trade Desk.
She expects Magnite to “successfully execute the same game-plan TTD implemented in 2020,” which was based on setting the company apart from other competitors “as a provider of full-service digital ad products backed by independence.” Magnite is a “one-stop-shop” which offers it a “unique competitive advantage.”
Some may also believe that the run-up in MGNI stock price could also be due to a short squeeze. But that may be unlikely. Data from Nasdaq shows that short interest in the stock has been declining recently. In addition, the level of short interest is relatively low. Thus, a short squeeze may not be the reason behind the increase in MGNI stock price. Earlier this week, Magnite made an appearance at the Needham Growth Conference. CEO Michael Barrett said that the company will show growth in the first two quarters of 2021 from the same quarters in 2020.
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Bottom Line For MGNI Stock
There’s no question that Magnite’s success was attributed to the CTV segment’s acceleration by cord-cutters. Sure, the company has attracted many investors’ attention over the past year and many are starting to question if the stock has more room to run. It certainly looks to be in the right place with the rise in the programmatic advertising market. Nevertheless, competition is present in the space, with rivals such as PubMatic (NASDAQ: PUBM) which went public not long ago. Perhaps, the jury is still out on whether MGNI stock can be a multibagger stock in the long run. But as long as current growth rates persist, patient investors could be in for a reward.
