The advertising technology (or adtech) industry gained traction due to the surging demand for online advertising amid the COVID-19 pandemic-led remote lifestyles. Businesses began placing more emphasis on digitizing their marketing strategies and operations due to the increasing number of internet users worldwide. According to IAB, digital video advertising expenditure surged 49% in 2021 and is expected to increase 26% to $49.2 billion in 2022.
The adtech market is expected to grow substantially, driven by significant innovation in retail media, CTV/OTT, gaming, and digital audio. Also, the continuing rise of AR/VR, metaverse, and Web3 technologies is expected to spark innovation, which could drive the industry’s revenues further. The global digital advertising market Is expected to reach $1.2 trillion by 2027, growing at a 14.3% CAGR.
Given this backdrop, Wall Street Analysts predict fundamentally sound adtech stocks Magnite, Inc. (MGNI), The Trade Desk, Inc. (TTD), and PubMatic, Inc. (PUBM) to deliver substantial upside in the coming months.
Magnite, Inc. (MGNI)
MGNI in Los Angeles functions as an independent sell-side advertising platform in the United States and internationally. The company's platform provides applications and services to sellers of digital advertising inventory or publishers that own and operate CTV channels, applications, websites, and other digital media properties.
Last month, MGNI announced the launch of Deal Discovery, a self-service user interface to streamline PMP and Auction Package deal creation for multiple formats. "We developed Deal Discovery to improve workflows between publishers and buyers and allow them to more effectively collaborate," said Katie Evans, Chief Operations Officer, Magnite. With the help of this tool, buyers can curate open market inventory, request PMP deals in minutes, and surface under-exposed audiences by layering in their first-party data and other campaign parameters.
In February, MGNI announced the acquisition of Carbon, a program that permits publishers to measure, manage and monetize audiences in real-time. Since the industry is preparing to depreciate third-party cookies and other third-party identifiers, the acquisition expedites Magnite's seller-first, privacy-focused identity and audience solutions focused around first-party segments and bolsters the product and engineering teams in this critical area.
During the fourth quarter, ending Dec. 31, 2021, MGNI's revenue increased 96.7% year-over-year to $161.29 million. The company’s income from operations amounted to $3.64 million, while its adjusted EBITDA grew 125% from its year-ago value to $67.5 million. The company's non-GAAP EPS increased 37% from its prior-year quarter to $0.26.
Analysts expect MGNI's revenue to increase 76.4% year-over-year to $107.08 million for the first quarter, ending March 31, 2022. The company's EPS is expected to grow 158.1% year-over-year to $0.08 for the same period.
Among the seven Wall Street Analysts that rated the stock, five rated it buy, and two rated it hold. The 12-month median price target of $20.00 indicates a 97.8% potential upside. The price targets range from a low of $5.00 to a high of $26.00. The stock closed its last trading session at $10.11.
The Trade Desk, Inc. (TTD)
TTD in Ventura, Calif., is a technology company in the United States and internationally. It operates a self-service cloud-based platform that enables buyers to create, manage, and optimize data-driven digital advertising campaigns across various ad formats and channels, including display, video, audio, native, and social, on various devices, including computers and mobile devices, and connected TV.
In February, TTD announced the launch of OpenPath, a new product designed to allow advertisers direct access to premium digital advertising inventory. Initial publisher partners to join OpenPath include Reuters, The Washington Post, Gannett | USA Today Network, Conde Nast, McClatchy, Hearst Magazines, Hearst Newspapers, Advance Local, among others. OpenPath allows publishers the ability to unite directly with TTD. By doing so, advertisers can achieve direct access to advertising impressions created by those publishers, and publishers are better established to maximize revenue from those impressions.
TTD's revenue increased 24% year-over-year to $395.60 million for the fourth quarter, ending Dec.31, 2021. The adjusted EBITDA grew 25.3% from its year-ago value to $191.55 million, while its non-GAAP net income surged 12.6% from its prior-year quarter to $208.13 million. The company's non-GAAP EPS rose 13.5% year-over-year to $0.42.
The $0.14 consensus EPS estimate for the first quarter, ending March 31, 2022, represents 2.8% year-over-year growth. Analysts expect revenue to increase 38.4% year-over-year to $304.28 million. In addition, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Among the 11 Wall Street Analysts that rated the stock, nine rated it buy, and two rated it hold. The 12-month median price target of $103.30 indicates a 71.3% potential upside. The price targets range from a low of $70.00 to a high of $125.00. The stock closed its last trading session at $60.30.
PubMatic, Inc. (PUBM)
PUBM offers a cloud infrastructure platform that enables real-time programmatic advertising transactions for Internet content creators and advertisers worldwide. The Redwood City, Calif., company's solutions include Openwrap, a header bidding solution that provides enterprise-grade management and analytics tools.
For the fourth quarter, ending Dec.31, 2021, PUBM's revenue increased 34.3% year-over-year to $75.56 million. Its operating income grew 26% from its year-ago value to $27.97 million, while its non-GAAP net income improved 37.1% from its prior-year quarter to $27.07 million. The non-GAAP EPS rose 33.3% year-over-year to $0.48.
Analysts expect PUBM's revenue to increase 25% year-over-year to $54.52 million for the first quarter, ending March 31, 2022. The company's EPS is expected to grow 35.5% year-over-year to $0.85 for its fiscal year 2023. Moreover, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
All six Wall Street Analysts that rated the stock rated it buy. Closing its last trading session at $23.66, the 12-month median price target of $43.83 indicates an 85.3% potential upside. The price targets range from a low of $38.00 to a high of $49.00.
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MGNI shares were trading at $9.77 per share on Wednesday morning, down $0.34 (-3.36%). Year-to-date, MGNI has declined -44.17%, versus a -12.47% rise in the benchmark S&P 500 index during the same period.
About the Author: Spandan Khandelwal
Spandan's is a financial journalist and investment analyst focused on the stock market. With her ability to interpret financial data, she aims to help investors evaluate the fundamentals of a company before investing.
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