Magnite's Strong Q4 Overshadowed by Weak Guidance; $15.50 FVE; Shares Becoming Attractive Again

While Magnite’s share price increased more than 20% after we initiated coverage in December 2022, the stock’s 11% after-hours pullback in reaction to the firm’s light guidance has created an attractive entry point, in our opinion. Magnite reported strong fourth-quarter 2022 results, but its first-quarter and full-year 2023 guidance indicate that this year’s potential economic downturn will hurt ad spending growth more than we expected, especially on the connected TV side, which attracts more broad-based campaigns. However, we think partnerships with large media firms, such as Disney and Fox, and with additional streaming providers, like fubo TV, plus working more closely with demand-side platform providers position Magnite to benefit from an economic recovery that will drive strong growth in ad spending. With lower revenue growth projections, we reduced our fair valued estimate to $15.50 from $16.50.