It is all falling into place for Magnite (MGNI). The programmatic sell-side advertising platform was badly hit by the pandemic’s impact on ad budgets during the first half of the year. However, since the summer, the stock has picked up some serious momentum as the ad industry has recovered and investors have become aware of the opportunity the company represents in the rising CTV (connected TV) space. As a result, shares are up a whopping 290% year-to-date.
Among the supporters is Needham’s Laura Martin. The 5-star analyst compared Magnite to its equivalent on the other side of the programmatic advertising space – demand-side platform The Trade Desk.
Martin 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.” A further tailwind should come from the continued shift from linear TV to CTV.
But the company is also set to benefit from favorable macro conditions. GDP growth, according to academic studies, is closely correlated to advertising spend.
“Experts forecast a positive 500-1,000 basis point positive swing in GDP in 2021, with digital ads growing 2x-3x faster than overall ad revs,” Martin noted. “Within digital advertising, Connected TV ads (CTV) are growing fastest and since MGNI’s highest pay-outs come from CTV this implies upside to 2021 consensus estimates.”
To this end, Martin rates MGNI shares a Buy. However, her bullish rating is backed with a $30 price target, which implies a 6% downside from current levels. This is most likely a result of the stock’s meteoric rise and analyst’s inability to turnaround new price targets so quickly.
The rest of the Street is faced with a similar problem. Magnite has a full house of Buys – 7, in fact. However, the Strong Buy consensus rating comes with a $20.76 average price target, which represents ~35% downside for the year ahead.
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.