If you are an investor that is intrigued with all of the different ways in which advertising and technology intersect, a company like Magnite (NASDAQ:MGNI) needs to be on your shopping list. Advertising channels like websites, applications, connected television, and more offer companies the perfect opportunity to reach new customers and spread the word about their products and services. Consider the fact that there are plenty of people around the world who still don’t have access to the internet. Companies offering digital advertising services might have only just scratched the surface of their revenue potential.
That’s what makes Magnite such an interesting stock at this time. It’s a business that has created the world’s largest sell-side advertising platform. If you aren’t familiar with sell-side platforms, they allow publishers to connect with advertisers on the buy-side so that they can sell their advertising slots. Magnite stock is already off to a great start in 2021 and has risen over 104% year-to-date as of this writing. Let’s take a deeper look at why this company’s business model is so attractive.
High Growth Market Opportunity
Let’s say you are a digital publisher or a website that has open advertising spots. How do you go about finding advertisers that are willing to pay for those ad slots? The answer to that question has been simplified thanks to Magnite. The company offers the largest independent sell-side advertising platform and could become a leader in digital advertising over the years. That means adding shares for the long-term provides exposure to a market opportunity with a lot of room for growth. Just take a look at how the stocks of companies like Roku and The Trade Desk, which offer similar digital advertising services, performed last year to understand the upside potential of a stock like Magnite.
Sellers love Magnite because its platform offers things like real-time insights, TV content reporting, and a robust private marketplace that allows them to control how they sell their inventory. That makes it easy for publishers to use this technology to monetize their content across all screens and formats, including desktop, mobile, audio, and CTV. Buyers can also benefit from using Magnite thanks to the fact that it offers greater scale, lower cost, and more efficiency on its private marketplace.
The company recently released preliminary Q4 earnings results that impressed and sent the stock rallying higher. Magnite reported GAAP revenue of $82 million, up 69% year-over-year, and Adjusted EBITDA of $29.9 million. What was most interesting about the company’s preliminary results was the 53% growth in CTV revenue, which confirms that Magnite is benefitting from cord-cutting and streaming media trends. Content creators are starting to rely more on companies like Magnite as a way to monetize their content, which bodes well for the future of this company and the value it can add to long-term shareholders.
The rise of streaming television is a trend that is here to stay, which is another reason why investors should be looking to add shares of a company like Magnite. The company recently announced that it is acquiring SpotX, a leading platform in Connected Television and video advertising globally. Magnite will pay $1.17 billion in cash and stock to acquire the company from RTL Group, and the deal is expected to close in the second quarter of the year. After the deal is completed, Magnite will count some of the world’s leading programmers, broadcasters, and device manufacturers as its customers, including names like Disney/Hulu, Fox Corporation, Samsung, ViacomCBS, and Roku.
This is big news for a few reasons. First, it’s usually a good sign when a company like Magnite makes a strategic move to acquire a direct competitor, which is exactly the case with this acquisition. It’s also a move that opens new growth opportunities for Magnite, as the company currently generates the majority of its revenue from desktop and mobile. We know how the transition to connected TV has been accelerated by the pandemic, and with more people streaming ad-supported movies and TV shows, the growth opportunities for companies like Magnite are increased.
Magnite is a very intriguing ad-tech company that offers investors a chance to gain exposure to a burgeoning industry with tons of upside. If you are interested in the company’s business model and want to add shares, the stock has pulled back since the preliminary earnings release and could present a good entry point in the coming days.
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