7. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 25
Magnite, Inc. (NASDAQ:MGNI) is an adtech company that provides tech solutions to automate the sale and purchase of digital advertising inventory. The company’s platform offers services and applications for publishers owning and operating connected television (CTV) channels, websites, applications, and other digital media properties to monetize and manage their inventory. It also offers features to sellers of digital advertising inventory and buyers such as agencies, advertisers, agency trading desks, and demand side platforms (DSPs) looking to buy digital advertising inventory.
On March 19, the company announced an expanded partnership with Cross Screen Media after a successful 2024 election cycle. The adoption of ClearLine, Magnite’s self-service buying solution, allowed Cross Screen Media to drive incremental voter reach. Magnite, Inc. (NASDAQ:MGNI) recorded several highs in fiscal Q4 2024 and processed an ad spend of over $6 billion. It generated an adjusted EBITDA of $197 million and $118 million of free cash flow. Management is confident in the company’s future, primarily due to its result-bearing long-term investments.
The company’s most significant growth in the quarter came from Roku, LG, Vizio, Walmart, Disney, Fox, Warner Discovery, and Paramount. Netflix is continually ramping up, and Magnite, Inc. (NASDAQ:MGNI) is bullish about its Netflix opportunity, with significant growth in its global ad tier and corresponding ad revenue. The company ranks seventh on our list.
Crossroads Capital stated the following regarding Magnite, Inc. (NASDAQ:MGNI) in its Q4 2024 investor letter:
“Magnite, Inc. (NASDAQ:MGNI) is the largest independent programmatic Sell-Side Platform (SSP), an entity that provides technology solutions to automate the purchase and sale of digital advertising inventory on behalf of publishers. The company arose from the merger of The Rubicon Project and Telaria in 2020. It then acquired a CTV competitor SpotX in early 2021 to become the third-biggest CTV SSP, after Comcast’s Freewheel and the Darth Vader of the AdTech world, Google. Critically, Magnite stands today as the key enabler of Connected TV advertising for streaming platforms, an increasingly crucial revenue source for media parent companies around the world.
The company’s contract win with Netflix is proof of its differentiation in the space, and was something we expected after hearing back in early 2023 that Microsoft’s Xandr ad tech stack wasn’t capable of true CTV ad delivery. The company has impressive incremental EBITDA margins (75%+), and after spending the last few years consolidating its acquisitions, is in a place to capitalize on growth opportunities, generating cash flow far in excess of current market expectations.
Nonetheless, the company trades on a single-digit multiple of this year’s estimated EBITDA, with minimal credit applied to Netflix onboarding programmatic advertising. That’s strange, if only because the Netflix ad tier is likely to deliver $6 billion in ad spend next year, and half of that may go through Magnite with low-single-digit take rates (3.5 to 5.0%). Should this occur with incremental margins they have shown in the past, the company could see EBITDA rise by over $70 million next year, implying 30%+ growth from Netflix alone. Better yet, with the success of Netflix’s programmatic endeavors, other media customers may accelerate adoption of the same type of programmatic infrastructure/services with MGNI that were previously just tertiary monetization activities…” (Click here to read the full text)
