Shares of programmatic advertising expert MediaAlpha (MAX 2.44%) surged as much as 22.7% higher on Wednesday morning, lifted by a Street-stumping earnings report. The stock is reaching fresh multiyear highs today, notching prices not seen since October 2021.
How MediaAlpha beat Wall Street forecasts
MediaAlpha's fourth-quarter sales fell 6% year over year to $117 million, while the transaction value under management decreased by a milder 2% to $165 million. On the bottom line, the adjusted net loss shrank from $0.63 to $0.05 per share. Your average Wall Street analyst would have settled for sales near $112 million and a more damaging loss of roughly $0.18 per share.
The results also outpaced MediaAlpha's own projections, chiefly powered by an extensive marketing campaign for an unnamed customer in the property and casualty (P&C) insurance sector. Management expects this segment to deliver robust results in the first quarter as well, inspiring guidance for a smaller revenue decline and approximately 45% stronger profits in the first quarter.
A brighter future
MediaAlpha's management finally sees the light at the end of a long, dark tunnel. The company mainly provides digital marketing solutions for insurance carriers, and that industry is making an ad-spending comeback right now.
"Following a historic downturn, we believe the P&C underwriting cycle has finally turned," CEO Steve Yi said in a prepared statement. "While most carriers have yet to reach rate adequacy and fully resume their marketing investments, we are seeing clear signs of a market recovery and believe we are entering a period of sustained growth in P&C carrier marketing investments."
In other words, the inflation-based limits on advertising budgets are starting to lift, one specific subsector of the insurance market at a time.
So the company is getting back on its feet after a few difficult years. At the same time, this is not my best investment idea in the adtech market today, whether you're looking for deep value or impressive growth prospects. I suggest betting on the digital advertising rebound elsewhere while keeping a curious eye on MediaAlpha in the long run.