In this artice, we will look at the 8 Worst AdTech Stocks To Buy Now. Let’s look at where Magnite, Inc. (MGNI) stands against other worst adtech stocks.
Overview of the AdTech Industry
The adtech industry includes an array of products and companies, including supply-side platforms (SSPs), demand-side platforms (DSPs), data management platforms (DMPs), ad exchanges, and more. According to data by Allied Market Research, the global adtech market stood at $748.2 billion in 2021, and is anticipated to reach $2.9 trillion by 2031. This translates to a compound annual growth rate of 14.7% between 2022 and 2031. Experts believe that the industry is well-poised for growth, with the global supply-side platform segment (SS) reaching a market size of $117.32 billion by 2033. Technological advancements, supportive government policies, and higher consumer demand are all factors expected to drive this growth.
In addition, changing trends such as the exponentially growing use of advanced technology like artificial intelligence and machine learning, growing Internet and digital penetration, growth of social media platforms and better prospects for the gaming industry, are all responsible for this growth. In-app advertising, interactive ads, and higher use of connected TV (CTV) have become the dominant trends in the AdTech industry, driving growth and change.
Trends in programmatic advertising are also expected to improve, allowing the demand-side platform software market size to reach $120.1 billion by 2033. The demand for improved targeting and measurement capabilities for online ads is also an important factor to consider in this growth. While the AdTech industry seems promising on its own, the increasing use of artificial intelligence across all platforms is making it even more appealing.
Recent Happenings in the AdTech Sector
Despite its positive trends, the AdTech industry in the US is experiencing certain headwinds, the most prominent being Google’s highly profitable AdTech business going to trial. The Department of Justice and a coalition of states filed a lawsuit against the company in 2023, claiming that the company is illegally dominating the digital ad marketplace, leveraging its market power to suppress competition and innovation. A trial began this month, and the Department of Justice rested its case against its parent company for operating a monopoly in the AdTech market. The tech giant earned more than $200 billion through the placing and selling of ads in 2023, arguing that the reason behind this success is the “effectiveness” of its services. Prosecutors, however, claim that the company has used its dominance to shun rivals.
In addition, smaller AdTech firms are raising concerns over Google’s cookies alternative, Privacy Sandbox. While its ad business is under global scrutiny, the company is making adapting to Privacy Sandbox a critical necessity. However, regulators in the US and UK are of the opinion that the Privacy Sandbox would give Google the lion’s share of control over the digital advertising market, which might negatively affect competition.
Potential technology development delays seem to be negatively affecting smaller AdTech firms, changing the course of the industry. While conclusive results aren’t out, such changes are highly likely to alter AdTech industry trends.
Our Methodology
To list the 8 Worst AdTech Stocks To Buy Now, we used the Finviz screener, ETFs, and rankings to first identify 15 AdTech stocks. Next, we narrowed our list by selecting the 8 stocks that have high short interest but also a high number of hedge fund investors. Finally, these stocks were ranked in ascending order of their short interest. We have also added the number of hedge funds holding each stock as a secondary metric.
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 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Magnite, Inc. (NASDAQ:MGNI)
Short Interest: 6.20%
Number of Hedge Fund Holders: 25
Magnite (NASDAQ:MGNI) is an independent sell-side adtech company that provides tech solutions for the automation of the sale and purchase of digital advertising inventory. The company’s platform boasts 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. Apart from that, 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.
Magnite (NASDAQ:MGNI) manages a transparent marketplace that connects sellers and buyers, facilitating automated transaction execution at scale and intelligent decision-making. Its ad server and streaming sell-side advertising platform (SSP) offers CTV sellers an all-encompassing solution for yield monetization and management and streamlining workflow across direct-sold and programmatic video inventory.
The company has strong financials, exceeding its top-line financial guidance in Q2 fiscal 2024. It holds a competitive edge in the CTV market due to its selection as Netflix’s programmatic FSP partner. This collaboration has brought significant momentum to Magnite (NASDAQ:MGNI), making it appealing to new investors and partners alike. Its competitive moat stems from continuous investments in various capabilities and features over the years. Key drivers of its strong CTV performance were the growing programmatic adoption by some of the largest industry players, strong overall ad spend growth, and ad serving strength. Its ad spend grew more than 20% in Q2.
Apart from its Netflix win, Magnite (NASDAQ:MGNI) secured two other highly profitable partnerships: United Airlines and Roku. The company recently announced that it is set to act as the centralized ad platform for in-flight entertainment in United Airlines, showing its continued growth in the commerce media space and programmatic advertising arena. In addition, Magnite (NASDAQ:MGNI) also announced an expansion of its seven-year partnership with Roku in support of powering the new Roku Exchange. Integrating with Magnite (NASDAQ:MGNI) allows the Roku Exchange to connect to the programmatic ecosystem. In addition to connecting the exchange to third-party buyers, Magnite (NASDAQ:MGNI) provides a demand facilitation team and incremental advertising opportunities through its agency and clear line marketplace solutions.
Magnite’s (NASDAQ:MGNI) total revenue grew 7% to $163 million in Q2 2024 as compared to Q2 2023. 25 hedge funds hold stakes in the stock as of Q2 2024. Choice Equities Fund stated the following regarding Magnite, Inc. (NASDAQ:MGNI) in its Q2 2024 investor letter:
“Magnite, Inc. (NASDAQ:MGNI) – Portfolio holding Magnite is worth a deeper dive given the impressive list of customer wins the company has been announcing of late. Streaming players like Roku, Telus, Media Ocean and, most importantly, Netflix have all chosen Magnite to serve as their sole SSP (Supply Side Platform) to sell their ad inventory programmatically. The recent wins (which add to existing relationships with the likes of AMC Networks, DISH Media, Disney Advertising, FOX Corporation, FuboTV, LG Ads Solutions, VIZIO, and Warner Bros. Discovery) highlight the strength of Magnite’s offering within the Connected TV (CTV) value chain as the largest independent – and unbiased – supply-side ad exchange in the world. Though the wins have come in bunches lately, establishing this advantaged competitive position was not something that happened overnight, as CEO Michael Barrett has employed savvy, strategic acquisitions of CTV supply-side peers Telaria (2020), SpotX (2021), and SpringServe (2021) to bolster this position.”
Overall, MGNI ranks second among the worst adtech stocks to buy now. While we acknowledge the potential of adtech companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. 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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