On Friday, B.Riley resumed coverage on Magnite (NASDAQ:MGNI), the largest independent supply-side platform (SSP), with a Buy rating and a price target of $14.50. The firm highlighted the company's strong positioning in the connected TV (CTV) advertising market and anticipated growth in the sector.
Magnite has been recognized for its comprehensive software tools which aid publishers in automating the sale of digital advertising. The company's revenue is categorized into connected TV (CTV) and display, video, & other (DV+). Following a significant merger, rebranding efforts, and strategic acquisitions focused on CTV, along with the completion of a multiyear integration process that consolidated streaming assets, Magnite has established itself as a prominent independent ad tech partner for CTV publishers.
Despite experiencing a decline in the CTV segment in the second half of 2023, which saw a 4% year-over-year decrease due to a shift toward premium publishers with lower take rates, Magnite is expected to bounce back in fiscal year 2024. The company is forecasted to see low-double-digit CTV growth, buoyed by stronger ad spending trends, the migration of live sports to streaming platforms, a balanced mix of higher take rate business, and increased adoption of its ClearLine product.
B.Riley's optimism is further supported by Magnite's financial guidance, which projects a 10% year-over-year increase in ex-traffic acquisition cost (TAC) revenue growth for fiscal year 2024, up from 7% in the previous year. Additionally, the company is aiming for an approximate 100 basis points year-over-year expansion in adjusted EBITDA margins.
The firm also noted Magnite's improved capital structure and the attractive valuation of its shares. With the stock currently trading at an estimated FY24 enterprise value to adjusted EBITDA multiple of approximately 7.2x, B.Riley believes the risk/reward profile is compelling, particularly as the company gears up for an expected acceleration in CTV growth in the second half of 2024.
InvestingPro Insights
As Magnite (NASDAQ:MGNI) garners attention from B.Riley with a positive outlook, InvestingPro data and tips offer additional insights into the company's financial health and stock performance. With a market capitalization of $1.21 billion and a forward-looking sentiment, Magnite is navigating the competitive landscape of digital advertising with an eye on growth.
InvestingPro data reveals a price-to-earnings (P/E) ratio of -7.32, suggesting investor anticipation of future earnings growth despite recent losses. The adjusted P/E ratio for the last twelve months as of Q4 2023 stands at -6.89, indicating a slightly more favorable view of the company's earnings potential. Additionally, the revenue growth of 7.39% over the same period underlines Magnite's ability to increase its top-line figures in a challenging market.
From a stock performance perspective, Magnite's share price movements have been quite volatile, with a one-month price total return as of early April 2024 showing a significant drop of 24.21%. This aligns with one of the InvestingPro Tips, which highlights the stock's recent poor performance. However, the same tips also suggest that the stock is currently in oversold territory according to the Relative Strength Index (RSI), potentially indicating an opportunity for investors.
For those considering an investment in Magnite, the InvestingPro platform offers additional insights and tips, including a high shareholder yield and the expectation that net income will grow this year. With these factors in mind, and for a more comprehensive analysis, prospective investors can use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. Currently, there are 10 more InvestingPro Tips available that could guide investment decisions regarding Magnite.
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