What happened

Shares of PubMatic (PUBM 2.59%) soared last month after the supply side ad tech firm posted strong fourth-quarter earnings results in its first report as a publicly traded company.

According to data from S&P Global Market Intelligence, the stock finished February up 63%. As you can see from the chart below, the gains came predominantly at the end of the month when the earnings report came out.

PUBM Chart

PUBM data by YCharts

So what

PubMatic rode a rising tide in the ad tech sector through the first week as investors were still struggling to appropriately value its recent IPO. It also seemed to benefit from news that rival Magnite would acquire SpotX, perhaps stirring up rumors that PubMatic could also be an acquisition target. The stock jumped 11% on Feb. 5, the day that news came out.

A woman looking at a glass wall with TV images on it

Image source: Getty Images.

The big news from PubMatic came on Feb. 24 as it released its fourth-quarter earnings report. PubMatic's revenue jumped 64% to $56.2 million, well ahead of analyst estimates of $47.5 million; the company is benefiting from broader trends in the pandemic related to elevated screen time, which is driving ad dollars to digital channels. 

The company gained leverage as revenue jumped and adjusted EBITDA nearly tripled to $26.9 million, while adjusted earnings per share increased from $0.06 to $0.34, beating the consensus of $0.30. 

CEO Rajeev Goel said, "We are executing well and growing organically in mobile, digital video, and over the top streaming and connected TV (OTT/CTV). Our buyer supply path optimization relationships are expanding, and we are gaining market share in the large and growing global digital advertising market."

Now what

The company's guidance for 2021 was also better than expected as it called for full-year revenue growth of 21% to 24% to $180 million-$185 million, compared to expectations of $168.8 million. That indicates management expects some of the recent momentum to fade as the spike in digital advertising may cool off once the pandemic ends. However, management did say it was being conservative with second-half guidance after the strong performance in 2020.

If the company can top that guidance, which seems more likely than not, the stock should move higher from here.