Truist analyst Matthew Thornton recently boosted his 12-month price target for Magnite (MGNI 13.55%) to $9, citing business execution and the tech company's positioning within a growing market for its supply-side ad-tech platform. The report puts the spotlight on a scalable tech company that has largely gone under the radar since a recent merger made it the world's largest independent sell-side platform.

Thornton is onto something when it comes to Magnite's recent execution and the company's strong positioning in a growing market. Let's take a closer look at why investors may want to give this sub-$1 billion tech company some more attention.

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Better-than-expected second-quarter results

Advertising has been hit hard during the pandemic, especially in late March and early April when business shutdowns, stay-at-home orders, and travel restrictions caused many marketers to reduce or even pause their ad spend. Programmatic advertising -- the data-driven advertising Magnite helps publishers with -- was hit particularly hard. The flexibility and agility that makes programmatic advertising attractive to marketers worked against the company's revenue during the worst part of the crisis as marketers quickly paused and reduced spending to recalibrate their campaigns and cope with the current environment.

Given this backdrop, expectations were low going into Magnite's second-quarter update. But the tech company managed to easily beat analysts' consensus forecasts for the period. In addition, Magnite guided for sharp sequential revenue growth in Q3, underscoring the business's recovery.

Second-quarter revenue was $42.3 million, down 25% from Rubicon Project and Telaria's (the two companies that recently merged to form Magnite) combined revenue in the year-ago period, but well ahead of analysts' average forecast for revenue of $37.9 million. The company's adjusted loss per share of $0.10 was also better than analysts' average estimate for $0.14. Investors should note Magnite was up against a tough comparison in the year-ago period, when Telaria and Rubicon Project's combined revenue was up 37% year over year.

Importantly, management guided for a significant recovery in its business in Q3, calling for revenue between $51 million and $55 million. The midpoint of this guidance range implies a 25% sequential uptick and nearly flat growth on a year-over-year basis, compared to total revenue from Rubicon Project and Telaria's combined revenue in the third quarter of 2019.

Management called out advertising spend in its connected TV (CTV) channel as a key growth driver in its recovery. "We are pleased to see a meaningful recovery in revenue across our entire business, specifically with the pace of year over year growth in CTV to start the third quarter," explained Magnite CEO Michael Barrett in the company's second-quarter earnings release.

Barrett continued:

This follows our first full post-merger quarter creating an industry leading CTV and full service SSP. Programmatic ad-supported CTV is benefiting from the acceleration of cord cutting, buyers wanting more flexibility and control of their spend, inventory growth and overall consumer adoption rates.

Awaiting the arrival of the new Magnite platform

When asked during the earnings call if Magnite was seeing some validation that its merger of Rubicon Project and Telaria was helping its value proposition with customers, Barrett said it was seeing it play out "on a daily basis," as its customers are attracted to the combined company's financial strength, staying power, and quality offering.

But Barrett said the ultimate goal of the merger hasn't even come to light yet.

[T]he big opportunity that Mark [Telaria's former CEO] and I saw when we got together wasn't just being able to provide demand to publishers for all media types. ... But the idea was to take this to the next level and being able to combine some of the cool initiatives [that Telaria has] done with Hulu, with [Rubicon Project's] demand manager project, ... [and] bring them all together and have this one platform, one software first approach.

This critical initiative, however, "takes time," added Barrett. But as these more important aspects of the merger (which the company is working on in the background) begin to come to fruition, Magnite will be "shouting them from the mountaintop," Barrett said.

With Magnite's strength as the world's largest independent supply-side platform already boosting its value proposition to customers, the eventual launch of the "one platform, one software first" offering Barrett referred to during the earnings call may solidify the company's leadership on the sell side, helping it gain even more market share in a growing market for programmatic advertising. It will likely reinforce Magnite's positioning as the top independent, enterprise-grade CTV advertising solution.

But even ahead of this platform's unveiling, total revenue is already recovering, and CTV is seeing surging revenue growth.