Is Magnite a buy?

It’s time to breakdown a digital advertising name. Here is the breakdown on $MGNI, otherwise known as Magnite.


Current Price: $61.70

52/Wk High: $64.39

52/Wk Low: $4.09


Market Cap: $6.9 Billion


Read below for the breakdown!


Magnite ($MGNI) is a major sell-side advertising platform in which provides an automated system to purchase and sell digital advertising.


In recent news, Magnite acquired Spot X, a leading Connected TV (CTV) and video advertising company for $1.17 billion. The deal consists of $560 million in cash and 14 million shares of Magnite stock.


According to management, the Spot X acquisition will form the largest independent CTV and video advertising platform. Taking a quick look at Spot X, the company reported total preliminary non-GAAP net revenues for 2020 of $116 million, with $67 million being CTV.


Overall, the Spot X acquisition is a positive for Magnite and management looks forward to the future.


“Sellers have been looking for a scaled independent alternative to the giant companies who dominate the CTV marketplace,” CEO Michael Barret said.


Barret went on to note, “The combination of Magnite and Spot X will make this a reality by bringing together the best CTV technologies and teams at a critical time,” he said (investor.magnite.com).


Digging into the most recent quarter, Magnite beat Q3 expectations with an EPS of $0.06, better than the analyst’s consensus estimate of $-0.04. On a year over year basis, EPS improved 400%.



Magnite also reported solid revenues of $61 million for Q3, representing a 62% increase in revenues on a year over year basis. For comparison, Q3 2019 revenues totaled $37.6 million.



Breaking down revenues, CTV revenues totaled $11.1 million in Q3, representing a strong 51% increase in revenues on a year over year basis.


As for net loss, Magnite reported a $10.5 million net loss, a greater loss than the 2019 same time level of $6.2 million. Furthermore, Adjusted EBITDA operating expenses increased as well to $47.2 million from $31.5 million in Q3 2019.


On the bright side, the adjusted EBITDA margin improved to 23%, a significant increase from the previous year’s Q3 EBITDA margin of 16%.


Magnite management also provided guidance, expecting Q4 2020 revenues of $72 million to $75 million along with an adjusted EBITDA margin of 30% in Q4.


Overall, management is positive about the future.


“We are very pleased to post strong third-quarter results with growth across all formats including CTV, non-CTV video, mobile, and display; and these trends are continuing into the fourth quarter,” CEO Michael Barret said.


Shifting into the balance sheet the numbers are solid.


Total Debt: None


Total Liabilities: $510 Million


Total Assets: $866 Million


Cash & Short Term Inv: $104 Million


On a valuation basis, Magnite does trade at a premium.


Forward Price to Earnings: 335.33x


Price to Sales: 36.78x


Price to Book: 19.18x


Price to Cash Flow: 483.64x


Management has work to do and could be more effective.


Return on Equity: -25.11%


Return on Assets: -9.62%


Return on Invested Capital: -22.50%


Given the numbers the analysts are bearish with a mean price target of $47.26/share, representing a -23.40% loss.


It is also important to note that the high price target is $70.00/share, representing a 13.45% gain, while the low price target is $18.30/share, representing a -70.34% loss.


The big money is quite involved as well, with 73.32% of Magnite being owned by institutions. Top holders include BlackRock Institutional Trust, Granahan Investment Management, and The Vanguard Group.


On a technical basis, Magnite is bullish. According to the six-month charts, the MACD is moving to the upside within a range of 8.49 down to 6.51.


The six-month charts are also indicating an RSI of 78.66 and CCI of 122.88, both of which are on the high end.



In short, Magnite is a solid digital advertising name with a solid management team, increasing revenues, and a strong balance sheet.


EAT - SLEEP - PROFIT


Disclaimer: This is not direct financial advice, simply an opinion based on independent research.