Shares of Magnite (MGNI +7.02%), the sell-side adtech platform, were pulling back on reports that Walt Disney could stop using Magnite for its Disney Real-Time Ad Exchange, or DRAX, with some demand-side platforms (DSPs).
As a result, the stock closed down 10.8% on the news.
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Is Magnite in trouble?
At the Digiday Publishing Summit, Jamie Power, Disney's senior vice president of addressable sales, said in a presentation that Disney is no longer using Magnite with two demand-side platforms, Alphabet and The Trade Desk.
The news seemed to indicate a setback for Magnite, as being dropped by Disney in those relationships is clearly a loss of business, though Disney is still using Magnite to connect with dozens of smaller DSP partners.
Several Wall Street analysts pushed back against the market's response, saying it was old news and that the sell-off created a buying opportunity.
Benchmark, for example, said that the story originally arose back in March, essentially saying it was already priced in. Analyst Daniel Kurnos also argued that it was "highly unlikely" that Disney would build a full end-to-end stack without Magnite.
Craig-Hallum and Needham also said that the sell-off creates a buying opportunity for Magnite.
NASDAQ: MGNI
Key Data Points
What it means for Magnite
An 11% decline might seem excessive, considering the news seems partly speculative at this point, and the implications aren't fully understood.
Like other adtech stocks, Magnite has struggled in the aftermath of the pandemic, as the earlier boom in digital advertising has given way to slower growth and less enthusiasm among investors.
Magnite is still aiming to accelerate its growth, as revenue was up just 7% in the second quarter. With or without the Disney setback, the company will have to improve on that number in order for the stock to be a winner.
