Shares of Magnite (MGNI -2.53%) dropped by as much as 16% today after getting a downgrade from Wall Street. As of 2:40 p.m. EST, shares had somewhat recovered and were only down 9%.
Truist Securities downgraded its rating on Magnite shares from buy to hold, while analyst Matthew Thornton adjusted his price target from $12 to $37 to accommodate for the recent rally. The jump has put Magnite's valuation into ambitious territory and altered the risk/reward profile. Current levels properly value the company's prospects, and the possibility of slowing growth in the second half of 2021 could create some risks, in Thornton's view.
Thornton boosted his forecasts but warned that growth in the second half of the year could decelerate to 12%, down from the 60% expected in the first half. Some of the recent growth has been due to the merger with Telaria, which closed last April. Additionally, the COVID-19 pandemic affected the advertising industry in mid-2020, which will create favorable year-over-year comparisons.
Magnite faces some other possible risks around the long-term take rate as well as potential concerns around data privacy, according to Thornton, but should continue to benefit from the shift of advertising budgets to connected-TV platforms. The company is scheduled to report fourth-quarter results on Feb. 24.