Rubicon Project Has 27% Upside, Raymond James Says

In a report published Tuesday, Raymond James initiated coverage of The Rubicon Project Inc RUBI with an Outperform rating and a price target of $23

"Rubicon is a key player today in the large global display market ($30.5 billion according to MAGNA GLOBAL). Adding in online video ($15 billion) and global TV advertising ($209 billion) equates to a ~$300 billion total addressable market (TAM)," the analysts said.

Even assuming that half of this market is automated, and 50 percent of that part remains with owned and operated publishers, this translates to a managed revenue opportunity of about $75 billion for the company.

In the report Raymond James mentioned the key positives of Rubicon Project as:

• Leading independent player with significant scale – reach of 650 million-plus global users
• Robust technology platform that enables Rubicon to more effectively monetize inventory and match buyers and sellers
• Strong value proposition for sellers/publishers, as Rubicon enables sellers to increase productivity of their sales teams and optimize pricing
• The analysts believe "direct integrations are a competitive advantage, as sellers integrate directly with Rubicon in order to maximize the monetization."

The analysts expect the company to generate revenue growth of more than 25 percent in the long term, driven by "increased penetration of buyers and sellers, expansion of the orders business, global expansion, and penetration of newer channels, including mobile and TV." Rubicon is targeting EBITDA margins of about 30 to 35 percent.