The move to online platforms is reshaping how businesses connect with their audiences. As people spend more time online, advertisers see the need to build a solid digital presence to stay competitive. This is evident in the growing importance of digital advertising methods like social media, search engine marketing, and display ads.
IMARC Group expects the global advertising market to grow at a CAGR of 4.6% during 2024-2032.
Moreover, the global AdTech industry, which includes tools for managing digital ad campaigns, is expected to experience rapid growth. This surge is fueled by the transition to online media and the rise of data-driven marketing approaches. The U.S. AdTech market is poised to grow at a CAGR of 22.6% from 2024 to 2034.
Against this backdrop, let’s compare two Advertising stocks, Magnite, Inc. (MGNI) and Taboola.com Ltd. (TBLA), to analyze which AdTech stock is poised for higher upside.
The Case for Magnite, Inc. stock
Valued at $1.87 billion by market cap, Magnite, Inc. (MGNI) operates an independent omni-channel sell-side advertising platform in the United States and internationally. The company's platform offers applications and services for sellers of digital advertising inventory or publishers that own and operate CTV channels, applications, websites, and other digital media properties to manage and monetize their inventory.
MGNI’s stock has declined 2.6% over the past three months but gained 34.3% over the past nine months to close the last trading session at $13.24.
In terms of forward EV/Sales, MGNI is trading at 3.74x, 90.4% lower than the industry average of 1.96x. Likewise, its forward EV/EBIT is trading at 54.41x, 264.9% than the 14.91x industry average.
MGNI’s 12.73% trailing-12-month EBITDA margin is 29.6% lower than the industry average of 18.07%. However, its 56.35% trailing-12-month gross profit margin is 9.8% higher than the industry average of 51.33%.
MGNI’s revenue for the second quarter that ended June 30, 2024, gained 7% year-over-year to $162.90 million. The company’s adjusted EBITDA grew 20% year-over-year to $44.70 million. The company’s net loss and loss per common share are $1.10 million and $0.01, respectively.
Street expects MGNI’s revenue for the quarter ending September 31, 2024, to increase 11.2% year-over-year to $147.98 million. The company’s EPS for the same quarter is expected to gain 34.8% year-over-year to $0.16.
MGNI’s POWR Ratings reflect its neutral outlook. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It has a C grade for Value, Quality, Sentiment, and Stability. Within the Advertising industry, it is ranked #7 out of 17 stocks. To see the additional grades of MGNI for Momentum and Growth, click here.
The Case for Taboola.com Ltd. stock
Valued at $1.09 billion by market cap, Taboola.com Ltd. (TBLA) and its subsidiaries operate an artificial intelligence-based algorithmic engine platform internationally. It offers Taboola, a platform that partners with websites, devices, and mobile apps to recommend editorial content and advertisements on the open web to users.
On August 30, TBLA unveiled its performance advertising-focused bidding technology, Maximize Conversions, for all advertisers. Maximize Conversions is an AI-powered technology that allows Taboola advertisers to drive more conversions and lower costs for campaigns.
On August 5, TBLA expanded its partnership with DoubleVerify, the leading software platform for digital media measurement, data, and analytics, with the integration of Doubleverify’s authentic marketplace solution, offering brands a more granular way to customize brand safety.
The integration gives brands confidence that their ad investments are matched with the appropriate content environment, leading to better performance.
TBLA’s stock has declined 1.8% over the past month to close the last trading session at $3.26.
In terms of the trailing-12-month asset turnover ratio, TBLA’s 0.97x is 95.6% higher than the 0.49x industry average.
TBLA’s revenues for the second quarter that ended June 30, 2024, increased 29% year-over-year to $428.20 million. Its gross profit grew 18.2% from the year-ago value to $144.80 million. The company’s adjusted EBITDA came in at $37.23 million, reflecting growth of 137.7% from the prior year’s quarter.
In addition, the company’s cash and cash equivalents were $182.20 million as of June 30, 2024, compared to $176.11 million as of December 31, 2023.
Street expects TBLA’s revenue and EPS for the third quarter (ending September 2024) to increase 19.2% and 321.1% year-over-year to $429.40 million and $0.08, respectively. Also, the company has topped the consensus EPS estimate in all of the trailing four quarters.
TBLA’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall A rating, translating to a Strong Buy in our proprietary rating system.
TBLA has an A grade for Sentiment and a B for Value and Growth. It is ranked #2 in the same industry.
Click here for the additional POWR Ratings for TBLA (Stability, Quality, and Momentum).
Magnite (MGNI) vs. Taboola (TBLA): Which AdTech Stock Is Poised for Higher Upside?
As smartphones and social media platforms become more widely adopted, digital advertising has evolved into a crucial element of marketing strategies for businesses across the globe.
Furthermore, digital platforms provide more accurate metrics and analytics, allowing advertisers to adjust their campaigns in real-time, resulting in more efficient marketing strategies. Both MGNI and TBLA stand to capitalize on these burgeoning industry trends. However, TBLA’s higher profitability and robust performance in the recent quarter favor it as the better Ad Tech stock pick.
Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Advertising industry here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MGNI shares were trading at $12.90 per share on Friday afternoon, down $0.34 (-2.57%). Year-to-date, MGNI has gained 38.12%, versus a 20.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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