We recently published a list of 11 Best AdTech Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Magnite, Inc. (NASDAQ:MGNI) stands against the other best Adtech stocks to buy.
As per Dimension Market Research, the Global AdTech market size touched US$1,066.8 billion in 2023 and should reach US$3,528.4 billion by 2032. The market is expected to compound at ~14.2% from 2024 to 2032. Some of the critical trends include a strong emphasis on privacy-centric advertising, growth fueled by AI-driven personalization, and dominance of video and mobile advertising.
Key Trends Defining the AdTech Market
Artificial Intelligence and Machine Learning continue to drive sophisticated audience segmentation and personalized ad experiences. As per Geomotiv, a software development company, these technologies can quickly analyze vast amounts of data, predict user behavior, and tailor ads in real time. Collectively, these features help to improve engagement and conversion rates. The benefits of personalization and the opportunities provided should drive the demand for these solutions and the growth of AI-oriented AdTech companies.
Market experts believe that advertisers continue to target Programmatic advertising. This space continues to expand beyond traditional digital channels. Adnimation, a software company, highlighted that CTV ad spending is expected to grow to $42.4 billion by 2027 in the US. Publishers that have video content should prioritize CTV and find for best supply-side platform (SSP) to tap into a rapidly growing market.
Advertisers have been leveraging programmatic to reach the audiences with targeted ads. Furthermore, programmatic continues to make inroads into the audio format, such as podcasts and music streaming services. Next, AdTech SaaS companies have been providing customizable solutions, which enable advertisers to tailor the tools and features as per the specific needs. The popularity of these products continues to grow among advertisers and publishers.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Blockchain and Influencer Marketing Should Drive Growth
As per Adnimation, data-driven influencer marketing is expected to dominate the broader AdTech market. Furthermore, the publishers and their AdTech counterparts continue collaborating with micro-influencers to fuel engagement and conversions. Blockchain technology should also be key in ensuring transparency in digital ad transactions. By decentralizing ad transactions, blockchain can help reduce ad fraud, improve trust between publishers and advertisers, and enable accurate tracking of ad performance. This will result in more reliable revenue streams. Adnimation also believes that, by 2025, video is expected to dominate digital ad formats, making up 82% of all internet traffic.
Our Methodology
To list the 11 Best AdTech Stocks to Buy According to Hedge Funds, we scanned through online rankings and AdTech-focused ETFs. After getting the initial list of 20-25 stocks, we shortlisted the ones having high hedge fund holdings. Finally, the shortlisted stocks were arranged in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with 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).
A marketing manager examining a publisher’s digital inventory on a laptop.
Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 20
Magnite, Inc. (NASDAQ:MGNI) offers online advertising solutions. The company is a leading independent sell-side advertising platform that specializes in programmatic advertising throughout multiple channels. Wall Street believes that Magnite, Inc. (NASDAQ:MGNI)’s expertise lies in connected TV (CTV), which remains the fastest-growing segment of digital advertising. The optimism around the company further strengthened when it got selected as the partner to power the Netflix ad-supported tier sale. The collaboration is expected to have a substantial impact on Magnite, Inc. (NASDAQ:MGNI)’s future revenues.
BofA Securities analyst Omar Dessouky believes that the Netflix partnership should result in a $30-million revenue run rate by 2025 end. Furthermore, the analyst believes that the Netflix partnership should be able to contribute $44 million/$69 million/$199 million to Magnite, Inc. (NASDAQ:MGNI)’s revenue in 2026, 2027, and 2028. Industry experts believe that Netflix should become the company’s largest CTV customer, which should help it offset any weakness from other partnerships.
As Netflix’s ad-supported tier grows, Magnite, Inc. (NASDAQ:MGNI) is expected to see improved revenue without proportional increases in costs. This should result in higher profitability. Furthermore, the company’s growth momentum is expected to be aided by its CTV advertising segment, which should see strong ad spend growth and programmatic adoption.
Magnite, Inc. (NASDAQ:MGNI)’s partnership with Disney got a 2-year extension, which further strengthens a 6-year collaboration. As a result of this, Magnite will help in monetizing Disney’s vast ad-supported content, spanning more than 30 DSPs. Courtesy of this high-profile content, the expanded relationship gives Magnite, Inc. (NASDAQ:MGNI) a strong standing in premium advertising.
Choice Equities Capital Management, a hedge fund manager, recently released its Q3 2024 investor letter. Here is what the fund said:
“Magnite, Inc. (NASDAQ:MGNI) and CROX – Magnite, Inc. and Croc’s Inc. remain holdings in the portfolio and were recently discussed in detail on the Yet Another Value Blog podcast, which can be found here: YAVB podcast. As discussed herein, both remain well-positioned in their respective industries and represent attractive values on anticipated cash flows in years to come. Magnite, as highlighted, looks attractive on its own merits, though shares could become particularly interesting should a handful of industry anti-trust events break their way.”
Overall, MGNI ranks 8th on our list of best AdTech stocks to buy according to hedge funds. While we acknowledge the potential of MGNI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued 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.
