The digital world is growing at a remarkable pace, with social media, mobile apps, websites, online search, and e-commerce becoming integral to our personal and public lives.
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Meanwhile, more businesses are focusing their advertising and marketing efforts on the digital side. According to Grand View Research, the digital ad market was worth $365.37 billion in 2022, and looking ahead to 2030, the research firm expects digital advertising to achieve a compound annual growth rate (CAGR) of 15.5%. Such growth potential is bound to catch the attention of Wall Street’s analysts and investors.
One such analyst is Nat Schindler of Scotiabank, who has turned his focus to digital advertising stocks. Schindler sees attractive valuations in at least two such tickers and isn’t hesitant to issue ‘Buy’ ratings for them.
Let’s take a closer look at these Scotiabank calls, the analyst’s commentary on them, and the latest data from the TipRanks platform .
Magnite ( MGNI )
First up is Magnite, an independent sell-side digital advertising firm – in fact, the LA-based company bills itself as the world’s largest such company, and it boasts a market cap of more than $2.4 billion. The company generated nearly $620 million in total revenues last year, for a 7% year-over-year gain, and is on track to beat that total this year.
Magnite’s business is digital advertising, which means getting messages out. The company claims that it can help its customers to win on every digital screen, everywhere. Magnite offers a platform and the tech backing to let online publishers monetize content across a wide range of formats, including online video, CTV, and even simpler displays and/or audio interfaces. Publishers can use the service on both desktop and mobile devices.
While Magnite bills itself as a sell-side ad firm, it works with all players who have an interest in digital advertising – media owners, sellers, and ad buyers. In addition to placing ads in a wide range of media, Magnite also helps customers identify and build their audiences and to boost and capture viewer demand. The company offers a variety of advertising product suites to suit any set of online needs and does the work with a global reach.
The results are clear. For the past several quarters, Magnite has seen its quarterly revenue and earnings post consistent year-over-year gains. The last report covered 3Q24 and showed a top-line revenue total of $162 million, up 8% from 3Q23 and more than $14 million better than had been expected. The bottom line, at 17 cents per share in non-GAAP figures, was up 5 cents per share from the prior-year quarter and beat the forecast by a penny. In the past 12 months, shares in Magnite have gained a robust 84%, outperforming the NASDAQ index by a wide margin.
This stock’s growth – and growth potential – have impressed Scotiabank’s Schindler. Despite its solid gains, the analyst does not believe that the full value is baked in yet, as he writes, “In our view, MGNI’s current valuation underappreciates its growth potential, particularly in CTV, which remains under-penetrated and offers a significant runway for expansion. As advertisers and publishers increasingly seek transparency and efficiency, Magnite’s end-to-end capabilities and leadership in CTV place it in an enviable position to capture incremental ad spend. We recommend a Sector Outperform rating, with an expectation of strong revenue growth and margin expansion as the company continues to scale its platform and deepen its market share in the lucrative CTV segment.”
That Outperform (i.e. Buy) rating is backed by a $22 price target that suggests a one-year upside potential of 34%. (To watch Schindler’s track record, click here )
This stock’s Strong Buy consensus rating is based on 11 recent Wall Street reviews that include a lopsided 10 to 1 split of Buy over Hold. The stock’s $16.44 share price and $19.31 average target price together imply a 12-month gain of 17.5%. (See MGNI stock forecast )
Viant Technology ( DSP )
Viant, the second stock we’ll look at, has been in the digital ad business for more than 20 years, and in that time has built itself into a $1.3 billion leader in online ad innovations. The company is well known for its DSP (demand side platform) advertising services – and even uses the acronym as its stock ticker. Viant’s platform lets its customers reach their own consumers through a full range of online channels and formats, as a truly omnichannel service. Viant backs this service with solid customer support, personalized to the client company’s individual needs – and Viant boasts that it regularly sees 95%-plus client satisfaction.
Along with its omnichannel ad execution, Viant also offers its customers access to customer reporting, with a suite of tools designed to provide in-depth analytics to all aspects of the digital ad campaign – and these tools, too, can be customized for the individual client’s needs. Viant’s services are known for their people-based targeting, sound data integrations, customer-driven outlook, innovative digital ads – and that is all brought together with a flexible and transparent pricing policy.
More recently, Viant has been shifting to meet the trends of the time – that is, the company is making full use of AI, integrating AI tech into its ad platforms and services. ViantAI is emerging as the industry’s first fully autonomous digital advertising platform, giving its users high levels of precision to better manage ad campaigns, and to better exploit new opportunities.
The company has been successful at turning this business model into results. Viant reported $79.9 million in revenue for 3Q24, achieving an impressive year-over-year gain of 34% and also beating the estimates by almost $11 million. Viant’s earnings figure, reported as a non-GAAP EPS of 15 cents, was nearly double the 8 cents reported in the year-ago quarter, and was 2 cents over the forecast.
When we check in again with Scotiabank’s Schindler, we find the analyst acknowledging the headwinds faced by Viant, yet still he believes the stock represents a good opportunity for investors. “While the company is well positioned to benefit from trends in digital advertising, particularly in CTV, its execution has been less consistent compared with TTD. Viant’s lower growth rates and smaller scale limit its ability to capture incremental market share in the same way as its larger, better-capitalized peer. However, at current levels, the market appears to overly discount these challenges, creating an attractive entry point for investors willing to bet on the company’s potential for operational improvement and market share gains.”
These comments support another of Schindler’s Outperform (i.e. Buy) ratings, while his $27 price target on DSP points toward an upside potential of 29% on the one-year horizon.
This stock has 5 unanimously positive recent analyst reviews, giving the shares a Strong Buy consensus rating. The average price target here is $20.40, suggesting the stock will stay rangebound for the time being. (See DSP stock forecast )
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy , a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
