Netflix (NASDAQ:NFLX) recently selected Magnite (NASDAQ:MGNI) as a key player in its developing programmatic ad strategy, marking a significant opportunity for the AdTech company. Following the announcement, Magnite’s shares soared, climbing over 36% in the past few weeks.
Don't Miss our Black Friday Offers:
- Unlock your investing potential with TipRanks Premium - Now At 40% OFF!
- Make smarter investments with weekly expert stock picks from the Smart Investor Newsletter
As the digital ad market grows more substantial, Magnite’s financial performance is expected to continue to improve. The shares are richly valued, suggesting the market has already priced in growth expectations. Growth investors looking for a media stock may find this of interest, provided they are willing to pay up for it.
Magnite’s Partnerships
Magnite is the world’s largest independent sell-side advertising company. It is known for its high-quality, brand-safe ad inventory and is set to be a key player in Netflix’s new programmatic ad strategy.
Netflix plans to launch an in-house ad platform by the end of 2025 with the support of Magnite, Google (NASDAQ:GOOGL), and The Trade Desk. This move, coupled with the announcement that Netflix’s ad-supported plan enjoys 40 million users, indicates a potentially significant increase in revenue for Magnite.
Further enhancing its wealth, Magnite partnered with Shopsense AI, which creates shoppable video ads that stream online. Despite Shopsense’s lack of wide name recognition, Paramount Global (NASDAQ:PARAA) utilizes its software, amplifying the significance of this partnership.
These back-to-back partnerships renewed investors’ confidence despite ongoing concerns over supply path optimization (SPO) and the role of supply-side platforms (SSPs).
Magnite’s Recent Financial Results & Outlook
Magnite recently published its Q1 2024 earnings report. The company reported revenue of $149.3 million, marking a 15% year-over-year growth and beating projections by $25.14 million. Non-GAAP earnings per share (EPS) of $0.05 also exceeded expectations by $0.05.
Despite the top-line growth, the company experienced a net loss of -$17.8 million, equating to a loss per share of -$0.13. However, this was a significant improvement compared to the net loss of -$98.7 million, or a loss per share of -$0.73, the company reported in Q1 2023.
Management raised top and bottom-line guidance with anticipated growth in adjusted EBITDA margin to 100-150 basis points over 2023, with its growth expected to hit the mid-teens, an increase from the previously anticipated double-digit percentage. Another significant growth is anticipated in free cash flow, and total CapEx is expected to fall in the mid to high $40 million range, including property, plant, & equipment (PP&E) and capitalized software.
What Is the Price Target for MGNI Stock?
Analysts covering the company have been bullish on the stock. BofA analyst Omar Dessouky recently upgraded shares from Neutral to a Buy with a price target of $15 (up from $13), citing the company’s leading role as the industry transitions into more automated ad execution.
Magnite is rated a Strong Buy based on the collective ratings and price targets assigned by nine Wall Street analysts over the last three months. The average price target for MGNI stock is $15.21, representing an upside of 21.97% from current levels.
The stock has been volatile, though the overall trend lately has been up, with the stock climbing over 33% year-to-date. It currently sits at the upper end of its 52-week price range of $6.28 – $15.73, and it continues to demonstrate positive price momentum trading above its 20-day (10.44) and 50-day (10.01) exponential moving averages. The stock appears richly valued, with a P/S ratio of 2.695x compared to the Advertising Agencies industry average of 0.916x.
Final Thoughts on MGNI
Significant partnerships with Netflix and Shopsense AI position Magnite as a key player in the burgeoning digital ad market. The company is primed for growth in an industry transitioning towards automated ad execution. Despite its shares’ volatility and rich valuation, investors may find the revenue growth, improved net loss margin, and promising cash flow outlook an enticing prospect for a growth-focused opportunity.
