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.