Company Reports

Magnite is the largest independent supply-side platform, or SSP, where digital publishers and platforms offer their advertising inventory for advertisers to buy. Magnite receives a portion of the total ad dollars sold on its platform, called the take rate.

Magnite is the largest independent supply-side platform, or SSP, monetizing digital advertising inventory for publishers and earning a take rate on all ads sold. Over the past decade, header bidding technologies have commodified many SSP services. In the next decade, artificial intelligence overviews are set to fundamentally change how users consume information, most likely reducing the value of ad inventory on many websites. As such, a challenging environment is becoming even tougher for SSPs. If there is a glimmer of hope for Magnite, it lies in the potential to monetize a surge of connected television, or CTV, streaming inventory, which is growing as publishers seek a return on their content spending beyond subscription revenues. Still, we see independent ad tech players as structurally disadvantaged relative to the largest closed ecosystems with data advantages.

Magnite delivered a strong second quarter, with contribution excluding traffic acquisition costs up 17% year over year, led by 36% streaming (CTV) growth. Adjusted EBITDA rose 30%, and margins reached 37%, prompting management to raise its full-year growth and profitability outlook.

Magnite posted solid first-quarter results, with contribution excluding traffic acquisition costs up 10% year over year to $160.9 million, exceeding management’s forecast. CTV (streaming) contribution ex-TAC rose 30%, while desktop and mobile declined 5%. Margin guidance was bullish.

Magnite reported fourth-quarter revenue, excluding traffic acquisition costs, or ex-TAC, and streaming television, or CTV, revenue, ex-TAC, growth of 8% and 20%, respectively, both beating management’s expectations of 7% and 13%. Non-CTV growth was weaker than expected.

Magnite is the largest independent supply-side platform, or SSP, monetizing digital advertising inventory for publishers and earning a take rate on all ads sold. Over the past decade, header bidding technologies have commodified many SSP services. In the next decade, artificial intelligence overviews are set to fundamentally change how users consume information, most likely reducing the value of ad inventory on many websites. As such, a challenging environment is becoming even tougher for SSPs. If there is a glimmer of hope for Magnite, it lies in the potential to monetize a surge of connected television, or CTV, streaming inventory, which is growing as publishers seek a return on their content spending beyond subscription revenues. Still, we see independent ad tech players as structurally disadvantaged relative to the largest closed ecosystems with data advantages.

We are reinitiating coverage of Magnite, the supply-side platform and ad server network. It monetizes publisher ad inventory across the internet—from streaming platforms to open web banners—and competes with closed ecosystems, other SSPs, and supply path optimization tools.

Magnite is the largest independent supply-side platform, monetizing digital advertising inventory for publishers and earning a take rate on all ads sold. Over the past decade, header bidding technologies have commodified many SSP services. In the next decade, artificial intelligence overviews are set to fundamentally change how users consume information, potentially reducing the value of ad inventory on many websites. As such, a challenging environment is becoming even tougher for SSPs. If there is a glimmer of hope for Magnite, it lies in the potential to monetize a surge of connected television (CTV) streaming inventory, which is growing as publishers seek a return on their content spending beyond subscription revenues.

Magnite posted a nice acceleration in revenue growth during the fourth quarter as it benefited from the rebound in demand for digital advertising. Revenue, excluding traffic acquisition costs, exceeded management’s forecast across all channels, including connected television. CTV revenue still declined slightly year over year, but would have grown about 4% excluding political ad spending a year ago. Total revenue, excluding TACs, increased 5.5% year over year to $165 million. Cash flow remained solid as Magnite generated more than $75 million during the quarter, partly thanks to favorable working capital changes, and about $177 million for the full year. Management modestly increased its outlook for 2024 revenue growth, excluding TACs, to about 10% from the high single digits, which aligns more closely with the expectation in our $15.50 fair value estimate.

We will discontinue analyst coverage of Magnite on or about March 15, 2024. We provide analyst research and ratings on over 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

We are maintaining our $15.50 fair value estimate of Magnite.

We are maintaining our $15.50 fair value estimate for Magnite. While the firm is facing some headwinds in the short term, we think it is well positioned to benefit from the growing CTV and retail media programmatic ad market. After today’s 13% decline in reaction to PubMatic’s second-quarter results and another 14% drop afterhours on its own results, the stock is in 4-star territory.

We are maintaining our $15.50 fair value estimate for Magnite and view the no-moat stock as attractive. Magnite’s first-quarter results were indicative of the recovery underway in the digital advertising space, driven by continuing growth in not only the mobile channel, but also connected TV. We still expect the connected TV market to grow at an average annual rate of 21% through 2027, in which Magnite will be one of the main players on the supply side.

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.

Magnite, formerly The Rubicon Project, has successfully transitioned from an online digital ad exchange platform to one of the leading complete independent sell-side platforms in the programmatic digital ad market. The firm continues to focus on the connected TV, or CTV, market which we estimate will grow around 21% per year in the U.S. through 2027. With publishers such as Disney, Fox, and fuboTV expanding CTV inventory, we think Magnite’s revenue growth can outpace the market.

We are initiating coverage of Magnite with no-moat and stable trend ratings and a fair value estimate of $16.50. We assign Magnite an Uncertainty Rating of Very High. Magnite's shares trade at a 30% discount to our fair value estimate, and we view them as attractive.

Magnite, formerly The Rubicon Project, has successfully transitioned from an online digital ad exchange platform to one of the leading complete independent sell-side platforms in the programmatic digital ad market. The firm continues to focus on the connected TV, or CTV, market which we estimate will grow around 21% per year in the U.S. through 2027. With publishers such as Disney, Fox, and fuboTV expanding CTV inventory, we think Magnite’s revenue growth can outpace the market.