Magnite's (MGNI -3.15%) stock surged nearly 19% during after-hours trading on Nov. 9 in response to the release of the company's third-quarter earnings report. The ad tech company's revenue rose 11% year over year to $145.8 million, beating analysts' estimates by $3.6 million. On an ex-TAC (excluding traffic acquisition costs) basis, its revenue grew 12% to $127.7 million.

Its net loss widened slightly year over year from $24.3 million to $24.4 million, but its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) increased 11% to $44.4 million. Adjusted earnings per share also rose 29% to $0.18 and cleared the consensus forecast by three cents. Does that earnings beat indicate that Magnite's stock is finally worth buying again?

A person watches a streaming video on a laptop while eating popcorn.

Image source: Getty Images.

What does Magnite do?

Magnite was created by the merger of two smaller ad tech companies, The Rubicon Project and Telaria, in April 2020. That combination created the world's largest independent sell-side platform (SSP) for digital ads. SSPs help publishers manage and sell their own ad inventories, and sits at the opposite end of the advertising supply chain from demand-side platforms (DSPs) like The Trade Desk (TTD -2.95%). The demand-side services enable ad agencies, advertisers, and trade desks to bid on the ad spaces on offer from the sell-side crew.

Alphabet's (GOOG -1.65%) (GOOGL -1.60%) Google, Meta Platforms (META -0.43%), and other advertising giants bundle together SSPs, DSPs, and other ad tech services, but clients that don't want to tether themselves to those prisoner-taking ecosystems might prefer to work with independent players like Magnite and The Trade Desk.

Making sense of Magnite's messy numbers

Over the past two and a half years, Magnite expanded by acquiring SpotX and SpringServe to expand its CTV advertising ecosystem, and purchasing Carbon to integrate more publisher monetization tools into its platform. However, those acquisitions also significantly inflated its reported revenue while changing some of its key growth metrics.

To smooth out those year-over-year comparisons, Magnite started to report its growth in pro forma terms -- but it stopped using that metric in the third quarter after it lapped its most recent acquisition. Its acquisition of SpotX also added traffic acquisition costs to its core business, so it introduced the ex-TAC measure to paint a clearer picture of its underlying growth.

The following table illustrates just how confusing those comparisons can be. But the main thing investors should focus on is Magnite's growth in pro forma ex-TAC revenue, which decelerated until the metric was retired in the third quarter.


Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

Reported Revenue Growth (YOY)






Ex-TAC Revenue Growth (YOY)






Pro Forma Ex-TAC Revenue Growth (YOY)






Data source: Magnite. YOY = Year-over-year.

Going forward, investors should primarily focus on Magnite's ex-TAC revenue, which it expects to rise 6%-10% year over year in the fourth quarter. That would represent a slight deceleration from its 12% growth in the third quarter, but it allays some fears of a deeper slowdown as macro headwinds continue to rattle the digital advertising market.

Tracking the growth of its CTV business

Magnite is resisting that slowdown by expanding its closely watched connected TV (CTV) business, which has been carving out a niche against Google, Meta, and other larger platforms by focusing on streaming videos. That niche will grow as more advertisers shift their spending away from the saturated desktop and mobile markets.

On a pro forma basis, the CTV segment grappled with a slowdown through the first half of 2022 as the supply chain disruptions caused automakers and other major customers to buy fewer ads. But it continued to grow at a faster clip than its mobile and desktop businesses in the third quarter, and it still accounts for a growing slice of its ex-TAC revenue:


Q3 2021

Q4 2021

Q1 2022

Q2 2022

Q3 2022

CTV Reported Revenue Growth (YOY)






CTV Revenue Pro Forma Growth (YOY)






Percentage of Total Revenue






Source: Magnite. Ex-TAC basis.

Magnite expects its CTV ex-TAC revenue to rise 17%-20% year over year in the fourth quarter. During the conference call, CEO Michael Barrett attributed the segment's growth to "new and ramping" partnerships with big clients like Disney, Fox, Kroger, Vizio, and LG, while reiterating its "ability to grow even with a tougher macro and more challenging ad spend environment."

Lastly, Magnite's adjusted EBITDA margin rose by a percentage point and stayed flat year over year at 35%. That's in line with its expectations for maintaining adjusted EBITDA margins of 35%-40% over the long term.

Is Magnite's stock too cheap to ignore?

Magnite's acquisitions can be confusing, but the company believes it can grow ex-TAC revenues by 25% annually as its CTV business expands. That's a rosy outlook for a stock that trades at just 1.4 times next year's sales. The Trade Desk is growing faster and doesn't rely as heavily on acquisitions, but it's also a lot pricier at ten times next year's sales. Therefore, I believe Magnite is still cheap -- and it could still be a potential multibagger for investors who can tune out the near-term noise.