Shares of Magnite (NASDAQ:MGNI) popped today, up by 10% as of 12:15 p.m. EST, after a Wall Street analyst boosted her price target on the stock. Needham analyst Laura Martin remains very bullish on Magnite's prospects.
Martin reiterated her buy rating on Magnite shares while increasing her valuation estimate from $15 to $18. The advertising technology company stands to benefit from numerous trends, according to Martin. Political ad spending should be strong in the fourth quarter, cord-cutting continues to accelerate among U.S. households, and consumers are buying more streaming devices per household.
Advertisers are spending more on upfront ads, to the tune of an estimated $7 billion. There is also a marked demographic shift in consumer usage that is pushing advertisers to adopt connected TV platforms.
Magnite was created from the merger of Rubicon Project and Telaria that was announced last year and closed over the summer.
According to Martin, advertising-based video-on-demand companies like Magnite and The Trade Desk "have more valuation upside" than subscription video on demand competitors. She noted that Magnite generates virtually all of its revenue from advertising and its connected-TV revenue grew by 50% year-over-year in the third quarter to comprise nearly 20% of revenue.
The analyst suggests that the COVID-19 pandemic has pulled forward several key catalysts by one to two years, since the crisis has caused a surge in demand and engagement for home entertainment options such as over-the-top streaming TV platforms.