Needham Sees Magnite As Primary Beneficiary Of Netflix, Disney+ Adding Ad-Driven Streaming Tiers

  • Needham analyst Laura Martin maintained Magnite, Inc MGNI with a Buy and cut the price target from $25 to $13 (51% upside).
  • Macro upside value drivers include an economic recovery and rapidly growing digital and programmatic ad revenues in 2022. 
  • Martin listed the reasons behind MGNI being her favorite.
  • Firstly, MGNI included video and CTV having the highest pay-outs to MGNI, and the SpotX acquisition supercharges CTV and video revenue growth.
  • Secondly, MGNI got paid based on a percentage of total ad spending, and experts projected rapid U.S. programmatic ad growth in 2022.
  • Thirdly, COVID-19 accelerated consumers' digital viewing and ad units into closer time frames, thereby increasing MGNI's TAM. 
  • She believed the upside value drivers suggest consensus estimates were too low for 2022.
  • Martin cut the 2Q22 and FY22 revenue and earnings estimates for MGNI to account for soft ad spending in the EU beginning in 1Q22, which has spilled over into the U.S. in 2Q22. 
  • Additionally, she heard from other AdTech companies that digital ad spending weakened as 2Q22 progressed. 
  • For now, she maintained her 3Q22 and 4Q22 estimates.
  • She believed connected TV (CTV) ad growth was a critical exception to ad softness during 2Q22. 
  • She saw CTV represent over 40% of MGNI's total net revs in 2Q22 and will grow at 30%-40% Y/Y.
  • Looking out to FY22 and FY23, she believed MGNI is the primary beneficiary of Netflix, Inc NFLX and Walt Disney Co DIS Disney+ adding ad-driven streaming tiers. 
  • MGNI has more representation of premium publishers than any other AdTech competitor, making it the most likely choice, Martin added.
  • Price Action: MGNI shares traded lower by 9.43% at $8.59 on the last check Wednesday.

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