What happened

Shares of advertising-technology (adtech) company Magnite (MGNI 2.48%) popped on Thursday morning after an analyst said it was a stock to buy. As of 10:40 a.m. ET, Magnite stock was up 10%.

So what

News broke yesterday after the market closed that B. Riley analyst Daniel Day had started covering Magnite stock. And according to The Fly, Day recommends buying Magnite stock, giving it a price target of $15 per share, which represents nearly 70% upside from where the stock traded yesterday.

As Day alludes to in his note, stocks related to connected TV (CTV), including Magnite, had their time in the sun during 2020 and 2021 when consumers were stuck at home and streaming video content. But these CTV stocks, including adtech players, have subsequently sold off as the trend faded. 

Day believes the sell-off is overdone, positioning Magnite for market-beating gains going forward. And that's why the stock is up today.

Now what

As of the fourth quarter of 2022, 41% of Magnite's revenue was from CTV (when adjusting revenue to account for traffic acquisition costs, a common adjustment for adtech companies). Therefore, CTV is significant for Magnite.

Magnite stock is down 85% from its all-time high. But I wouldn't say it's entirely due to lack of excitement for CTV stocks from investors. Indeed, Magnite's growth is drastically slower than it once was.

For the upcoming first quarter of 2023, Magnite expects to generate adjusted CTV revenue of $42.5 million to $44.5 million, implying just 5% year-over-year growth, at best.

Therefore, Magnite's growth is challenged, so the stock is understandably down. That said, it trades at just 2 times sales, an attractive valuation that could give this stock upside, as Day suggests.

But in my opinion, Magnite stock will be stuck in neutral until investors see a clear path for the company to return to better growth.