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Why Magnite Stock Jumped 41% Last Month

By Jeremy Bowman - Mar 3, 2021 at 10:00AM

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The ad tech company soared on a key acquisition.

What happened

Shares of Magnite (MGNI -12.98%), a supply-side programmatic advertising tech company, were flying higher last month after the company announced a breakthrough acquisition to accelerate its growth in connected TV (CTV) and delivered a solid fourth-quarter earnings report.

According to data from S&P Global Market Intelligence, the stock finished February up 41%.

A woman looks at TV screens on a glass wall

Image source: Getty Images.

As you can see from the chart below, the gains came at the beginning of the month as Magnite announced the acquisition and gave preliminary earnings results on Feb. 5.

MGNI Chart

MGNI data by YCharts.

So what

Magnite rallied into the first week of the month on broader momentum in the ad-tech sector over the last year. On Feb. 2, the company announced a beta test for a new CTV and over-the-top solution, strengthening its position in the fast-growing ad-based streaming segment.

That Friday, Feb. 5, Magnite hit investors with a bigger announcement, saying it would acquire SpotX to create the largest independent CTV and video advertising platform. Magnite will buy SpotX for $1.17 billion from RTL Group, creating a powerhouse publisher-side ad tech firm that counts major cable networks and streamers like Roku and Hulu among its customers. The company also expects the deal to achieve $35 million in annual cost-savings synergies. 

At the same time, Magnite reported preliminary fourth-quarter results, saying that revenue rose 69% (or 20%, excluding the Telaria acquisition). And it posted $29.9 million in adjusted EBITDA, good for a 36% margin. 

Investors were clearly impressed with the SpotX acquisition, sending the stock up 26% that day. Shares pulled back on its full earnings report, which came out on Feb. 24, even though the company beat analyst estimates.

Now what

Magnite is in a strong position to capture much of the growth in supply-side CTV, helping content platforms manage their ad inventory, as 67% of the combined company's revenue came from CTV and video in the fourth quarter. 

While high expectations are baked into the stock after the rally over the past year, the SpotX deal should pave the way for long-term growth as CTV takes over.

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