We came across a bullish thesis on Magnite, Inc. (MGNI) on Substack by Stock Analysis Compilation. In this article, we will summarize the bulls’ thesis on MGNI. Magnite, Inc. (MGNI)’s share was trading at $16.44 as of Dec 12th. MGNI’s trailing and forward P/E were 126.46 and 20.53 respectively according to Yahoo Finance.
A close-up of a busy web page, representing the creative platform solutions of the digital advertising solutions company.
Magnite, the largest independent programmatic Sell-Side Platform (SSP), is poised to lead in the rapidly growing Connected TV (CTV) advertising market, with its strategic Netflix partnership solidifying its position as a critical enabler for streaming platforms. Born from the 2020 merger of The Rubicon Project and Telaria, and bolstered by its acquisition of SpotX in 2021, Magnite has established itself as a dominant player in the CTV space, trailing only Comcast’s Freewheel and Google. Its ability to provide robust CTV ad delivery capabilities, a weakness of Microsoft’s Xandr stack, has earned Magnite a contract with Netflix, underscoring its unique positioning and differentiation in this competitive market.
Magnite’s financial potential is equally compelling. With incremental EBITDA margins exceeding 75%, the company has completed its post-acquisition integration phase and is now positioned to capitalize on significant growth opportunities. Despite its dominance and the transformative nature of its Netflix deal, the market has undervalued Magnite, which trades at a single-digit multiple of next year’s estimated EBITDA. This valuation discounts the substantial revenue potential from Netflix’s ad-supported tier, projected to generate $6 billion in ad spend in 2024. If Magnite captures half of that with a take rate between 3.5% and 5.0%, its EBITDA could increase by over $70 million, representing more than 30% growth from Netflix alone.
Moreover, the success of Netflix’s programmatic advertising could catalyze other media companies to expand their adoption of Magnite’s infrastructure, further accelerating growth. With robust cash flow generation and underappreciated upside, Magnite offers a highly attractive investment case. Its leadership in CTV, combined with the expanding programmatic advertising ecosystem, positions the company to deliver outsized returns, making the current valuation an exceptional entry point for investors.
Magnite, Inc. (MGNI) is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 20 hedge fund portfolios held MGNI at the end of the third quarter which was 25 in the previous quarter. While we acknowledge the risk and potential of MGNI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MGNI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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