Magnite Earnings: Publishers and Advertisers Further Welcoming Programmatic Advertising

We are maintaining our $15.50 fair value estimate for Magnite MGNI 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.

In addition, like its peer PubMatic, Magnite is well-positioned to build stronger relationships with advertisers given the increasing adoption of supply path optimization by advertisers and agencies. With the recent launch of its ClearLine product, the firm is making headway in meeting the growing demand from advertisers for shorter and more efficient paths to access ad inventory. However, we also think Magnite is further treading on the non-walled-garden demand-side platform territory which The Trade Desk currently dominates. Offerings like ClearLine could entice some advertisers or their agencies to remove other participants (including demand-side platforms) from their digital advertising workflow and further increase efficiency. This could lead to less fragmentation within the ad-tech market during the next few years, whether via some firms exiting the market (such as what Yahoo and EMX did on the supply side) or more activity on the mergers and acquisition front in order to gather assets and provide a more complete ad-tech stack to compete more effectively against Google.