We recently published a list of 10 Best Small-Cap Stocks to Buy Before They Explode. In this article, we are going to take a look at where Magnite, Inc. (NASDAQ:MGNI) stands against other best small-cap stocks to buy before they explode.
Is Market Volatility Good For Small-Cap Stocks?
Since the announcement of tariffs, investors have been concerned regarding the market volatility. On February 4, 2025, Chris Clark, CEO and Co-CIO of Royce Investment Partners shared his insights as to how this market volatility can be helpful for small-cap stocks. February 2025 saw markets react negatively to President Trump’s announcement of tariffs on imports from China, Canada, and Mexico. Clark emphasized that it is still too early to gauge the positive or negative impacts of these tariffs on earnings and business fundamentals due to the current uncertainty. For instance, while initial announcements caused market disruption, subsequent negotiations led to temporary pauses on tariffs for goods from Mexico and Canada, restoring some measure of calm.
Clark highlighted that tariffs targeting Canada and Mexico appear to address non-economic issues like immigration and drug trade rather than purely economic concerns. This suggests they may be short-lived if their objectives are achieved. However, if sustained, these tariffs could significantly impact sectors such as housing, autos, and agriculture. Despite the disruption caused by these policies, Clark remains optimistic about the opportunities created by elevated market volatility. He argued that such environments allow active investors to distinguish high-quality companies from weaker ones, which he believes is an effective strategy for identifying long-term value amidst short-term uncertainty.
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Clark noted that tariffs will accelerate de-globalization, bring back business to the United States, and improve supply chain management in domestic manufacturing. These factors are anticipated to benefit the potential leadership of US small-cap stocks in the market. Clark cited that small caps have favorable valuations and their earnings are expected to grow. Additionally, the cyclical nature of markets and heightened volatility have historically benefited small-cap stocks relative to large-cap equities. His research shows that following periods of elevated volatility measured by the VIX index, small-cap stocks like those in the Russell 2000 tend to outperform large-cap counterparts over three-year horizons. Clark also stressed the importance of contrarian thinking during uncertain times. Drawing from decades of experience as a small-cap investor, he underscored how understanding market inflection points and challenging conventional wisdom are crucial for achieving long-term outperformance.
Our Methodology
To gather the 10 best small-cap stocks to buy before they explode we used the Finviz stock screener and CNN as our sources. Using the screener we aggregated a list of small-cap stocks (Market Cap of $500 million to $2 billion) with an upside potential of more than 50%. After sorting the list by market capitalization we cross-checked the analysts’ average upside potential of each stock from CNN. Lastly, we ranked these stocks in ascending order of the number of hedge fund holders, sourced from Insider Monkey’s Q4 2024 database. Please note that the data was recorded on March 25, 2025.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A marketing manager examining a publisher’s digital inventory on a laptop.
Magnite, Inc. (NASDAQ:MGNI)
Market Capitalization: $ 1.853 Billion
Analyst Upside Potential: 54.37%
Number of Hedge Fund Holders: 25
Magnite, Inc. (NASDAQ:MGNI) is an independent sell-side advertising company that specializes in digital advertising technology solutions. It primarily focuses on automating the buying and selling of digital advertising inventory. On March 21, Omar Dessouky, an analyst from Bank of America Securities, maintained the Buy rating on the stock while keeping the price target at $20. It is one of the best small cap stocks to buy before they explode.
Dessouky noted several strengths and opportunities for the company, particularly in the growing Connected TV advertising market. The analyst highlighted that the company is well-positioned to capitalize on the increasing prevalence of programmatic advertising in the CTV segment, which is a high-growth segment. Its SpringServe platform integrates ad serving with a programmatic layer, offering unique capabilities that are difficult for publishers to replicate internally, thereby reducing the risk of disintermediation. Moreover, the company has achieved significant penetration among major publishers, which positions it to grow revenues in line with publisher ad spend.
During the fiscal fourth quarter of 2024 as well, Magnite, Inc. (NASDAQ:MGNI) pointed toward its focus on expanding its programmatic CTV platform, leveraging partnerships with major players like Netflix, Disney, Roku, LG, and others. It also introduced AI-powered tools to optimize operations and enhance client-facing features. These include generative AI solutions for audience targeting and yield optimization engines for header bidding. Its quarterly revenue reached $668.2 million after growing 8% year-over-year driven primarily by CTV growth.
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)
Overall, MGNI ranks 8th on our list of best small-cap stocks to buy before they explode. While we acknowledge the potential of MGNI as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than MGNI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.