B.Riley has reaffirmed its Buy rating on Magnite (NASDAQ: MGNI), maintaining the $18.50 price target. The firm sees the recent share price decline as an opportunity for investors to purchase the stock at a discount.
Magnite's shares fell by 10.8%, a sharper drop than the 1.5% decline seen in the Russell 2000 Index, after comments made by The Walt Disney Company (NYSE:DIS)'s Senior Vice President of Addressable Sales.
Despite Disney connecting directly with Google (NASDAQ:GOOGL) and The Trade Desk (NASDAQ:TTD), thus bypassing Magnite for certain ad server functions, the company emphasized Magnite's ongoing importance in its advertising strategy.
The B.Riley analyst pointed out that the direct integrations with Google and The Trade Desk were announced back in March and do not pose a significant threat to Magnite's relationship with Disney or its role in the connected TV (CTV) and streaming advertising market.
Disney's contribution to Magnite's total revenue is estimated at around 2%, with a possibility that less than half of this could be affected by the new direct integrations.
The perceived negative impact of these recent developments on Magnite's stock is viewed as exaggerated by B.Riley. The firm suggests that the current weakness in Magnite's share price presents a buying opportunity, especially considering the company's valuation at approximately 8 times its forecasted FY25 enterprise value to adjusted EBITDA. B.Riley also cites the growth momentum in the CTV sector, Magnite's partnership with Netflix (NASDAQ:NFLX), and the upcoming Google ad tech antitrust trial as potential positive catalysts for the stock.
In other recent news, Magnite reported strong Q2 2024 results, surpassing its top-line guidance and reinforcing its position in the Connected TV (CTV) market.
Despite a net loss of $1 million, an improvement from a $74 million net loss in the same quarter last year, the company's adjusted EBITDA rose to $45 million, marking a 20% year-over-year increase. Magnite's cash balance also grew to $326 million, which the company plans to use for share repurchases, small acquisitions, and debt repayment.
In the same vein, Magnite's CTV contribution ex-TAC increased by 12% year-over-year, while DV+ contribution ex-TAC grew by 7%. The company anticipates continued growth in the CTV sector and reaffirms its full-year expectation of at least 10% growth in contribution ex-TAC.
On another note, Magnite has been maintained at a Buy rating by Needham, despite Disney's Real-Time Ad Exchange (DRAX) discontinuing the use of Magnite's services. Needham suggested that the market's response to this development was excessive, as DRAX represents a minimal portion of Magnite's projected net revenue for fiscal 2024.
Despite the recent developments, Magnite has solidified partnerships with companies like Netflix, United Airlines, and Roku (NASDAQ:ROKU), which are expected to drive future growth.
InvestingPro Insights
To complement B.Riley's optimistic outlook on Magnite (NASDAQ:MGNI), recent data from InvestingPro offers additional context for investors. Despite the recent share price decline, Magnite has shown a strong 1-year price total return of 66.58%, indicating significant momentum over the past year. This aligns with B.Riley's view that the current dip may present a buying opportunity.
InvestingPro Tips highlight that Magnite operates with a moderate level of debt and has liquid assets exceeding short-term obligations, which could provide financial stability as the company navigates market challenges. Additionally, analysts predict that Magnite will be profitable this year, supporting B.Riley's positive stance on the stock's potential.
It's worth noting that InvestingPro offers 11 additional tips for Magnite, providing investors with a more comprehensive analysis of the company's financial health and market position. For those interested in a deeper dive into Magnite's prospects, exploring these additional insights could be valuable in making informed investment decisions.
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