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Why Shares of DoubleVerify Surged 14% Higher This Week

By Nicholas Rossolillo – Oct 22, 2021 at 8:06PM

Key Points

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This ad technology stock bucked the industry trend.

What happened

Shares of advertising software technology vendor DoubleVerify (DV -1.60%) shot up 14% this week, according to data provided by S&P Global Market Intelligence. The company made its public debut earlier in the year and the stock has been volatile since the IPO. Nevertheless, DoubleVerify has been trending back up as of late since reporting a new partnership with TikTok late in September. The partnership will help measure video viewability and screen out invalid traffic for advertisers.  

A person sitting on a couch, holding a smartphone and remote control, and watching TV.

Image source: Getty Images.

In fact, following social media leader Snap's (SNAP -3.51%) disappointing earnings this past week blamed on Apple's (AAPL 2.44%) new user privacy rules, other stocks that rely heavily on digital ads fell in sympathy. Caught up in the pain were social media king Facebook, as well as ad marketplace software firms The Trade Desk, Magnite, and PubMatic. Not so with DoubleVerify.

DV Chart

Data by YCharts.

So what

DoubleVerify harbors a unique spot in the digital advertising ecosystem. Its software helps marketers, ad marketplace operators, and publishers get the most out of their campaigns. In the DoubleVerify toolbox are solutions for quality audience targeting, fraud detection and prevention, and ad yield enhancement (getting more ad viewer engagement). Given that its software addresses all stakeholders in the industry from ad seller to buyer, it stands to grow as the whole digital adtech space expands.  

In fact, DoubleVerify came out with a new product announcement the same day Snap said Apple's elimination of user activity tracking impacted its latest quarterly financials. Called the Custom Contextual Targeting for DV Publisher Suite, this tool helps publishers align content with marketer demand -- without compromising user identity or privacy. In an age where internet companies are being required to be less fast and loose with customer data, this kind of product could drive plenty of new demand for DoubleVerify's suite of services.  

Now what

Since debuting in public trade, DoubleVerify stock has failed to hold on to any positive traction. The business itself is doing more than just fine, though. Revenue increased 44% year over year in 2021's second quarter, the company is free cash flow positive, and management said to expect a 34% year-over-year increase at the midpoint of guidance provided for Q3. These third-quarter results will be announced on Nov. 9.

At a respective 22 and 108 times trailing-12-month sales and free cash flow, this certainly isn't a value stock. Nevertheless, DoubleVerify is an intriguing software provider for the digital ad industry -- and it's worth a look if you're a long-term investor (think five years or more) in this corner of the tech sector.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Nicholas Rossolillo and his clients own shares of Apple, Facebook, Magnite, Inc, PubMatic, Inc., and The Trade Desk. The Motley Fool owns shares of and recommends Apple, Facebook, Magnite, Inc, PubMatic, Inc., and The Trade Desk. The Motley Fool recommends the following options: long March 2023 $120 calls on Apple and short March 2023 $130 calls on Apple. The Motley Fool has a disclosure policy.

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