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Needham Bets on These 3 Advert Tech Shares

The web reworked promoting, and promoting, in flip, has impacted the online. From pop-up advertisements to pay-per-click to focused promoting, discovering and reaching the target market – the raison d’etre for entrepreneurs and advertisers, has exploded and developed within the digital age. And together with it has come an array of advert tech corporations, specialists within the software program and instruments that manufacturers and companies are utilizing of their internet marketing – organising, managing, and analyzing their digital campaigns, the outcomes, and the information collected. The growing use of sensible gadgets – primarily sensible telephones and tablets, however operating the vary from laptop computer computer systems to sensible watches – has been the primary driver of the advert tech market’s enlargement. That enlargement is substantial. In line with Verified Market Analysis, the advert tech software program market reached $16.2 billion in 2018, barely missed a step within the corona disaster yr, and is estimated to succeed in practically $30 billion in 2026. Watching that explosive progress is Needham analyst Laura Martin – ranked by TipRanks within the high 1% among the many Road’s inventory watchers, and an professional on the tech sector. Martin has weighed in on a number of the trade’s high corporations. These are companies with Purchase scores from the Road – and Martin sees them with upside potentials beginning at 30% and going up from there. Listed below are the small print. The Commerce Desk (TTD) Based mostly in Ventura, California, The Commerce Desk received its begin in 2009. The corporate gives customers a set of software program platforms designed for on-line media shopping for, providing prospects information, stock, and writer integrations, and facilitating customized improvement to fulfill customers’ wants. Commerce Desk’s platform lets digital advertisers and model managers leverage their information for natural progress throughout the web – on apps, podcasts, streaming TV, and ‘conventional’ web sites. Even after slipping from its peak share worth within the early a part of this yr, Commerce Desk inventory stays at excessive degree – it’s up 149% within the final 12 months. In February, the corporate reported its full-year 2020 outcomes, exhibiting $836 million in top-line income, a year-over-year improve of 26%. EPS for the yr got here in at $4.95, up 118% uptick from the yr earlier than. Two key metrics from the earnings report present the underpinning of Commerce Desk’s income and revenue progress. The gross spend – how a lot promoting spent by way of Commerce Desk’s platform – in 2020 reached $4.2 billion, a document for the corporate and a rise of 34% yoy. And, the corporate reported a 95% buyer retention price within the quarter. Commerce Desk boasts that it has reported such excessive buyer retention each quarter for the previous 6 years. This isn’t to say that Commerce Desk faces no headwinds. As famous above, the corporate’s inventory is down for the reason that starting of the yr – a fall that coincides with the start of Google’s deliberate phaseout of third-party cookies on the Chrome browser. These cookies, hated by internet customers as a violation of privateness, however beloved by advertisers as an enormous supply of knowledge assortment, have already been faraway from the Firefox and Safari browsers. Google’s phaseout will take away them from most internet browsing exercise, and take a serious instrument away from digital advert tech. Nonetheless, Martin believes the bullish case for TTD stays intact and really thinks that as a frontrunner of the “Open Web,” the corporate is poised to “take again market share from the “Walled Gardens (ie, FB, GOOGL, AMZN)” resulting from “higher comparability, measurement, and the shift to CTV advert items.” “TTD represents a pure play on the quickest rising sector in promoting – digital advert progress, together with linked TV promoting. TTD represents the 800 largest and most demanding advert companies and world client manufacturers, which is a significant barrier to entry,” the 5-star analyst additional mentioned. “TTD is the most important demand facet platform (ie, purchaser of advertisements) within the “Open Web” at $4B of whole advert spending on its platform in 2020 (about 10% of whole open web advert spending).” Alongside along with her Purchase ranking, Martin provides TTD shares a one-year worth goal of $1,000, suggesting an upside of 37% for the inventory. (To look at Martin’s observe document, click on right here.) Total, Commerce Desk has a Reasonable Purchase ranking from the analyst consensus, based mostly on 15 latest evaluations that embody 10 Buys in opposition to 5 Holds. The inventory shouldn’t be low cost, promoting for $729.31, however its $915.08 common worth goal implies an upside of 25% for the approaching yr. (See Commerce Desk’s inventory evaluation at TipRanks.) Magnite (MGNI) The subsequent inventory on our checklist, Magnite, is a “new” firm within the advert tech discipline – it was shaped by the merger of two veterans. In 2020, Rubicon Undertaking and Telaria mixed, and the consequence, Magnite, has rapidly change into an enormous participant within the advert tech trade. The corporate gives prospects advert promote know-how throughout a spread of on-line codecs, together with desktop, cell, audio, and streaming video. Magnite gives its customers the power attain their very own prospects – and potential prospects – rapidly and effectively. Born of a merger, Magnite has not too long ago grown via a merger. On April 30, the corporate closed its acquisition of SpotX, in a transfer that created the most important impartial CTV and video promoting platform. The acquisition got here with a complete buy worth of $1.14 billion, of which $640 million was in money and the rest paid in 12.374 million shares of MGNI. Magnite will talk about the merger transaction when it studies 1Q21 outcomes later this month. Within the meantime, it’s instructive to look again at Magnite’s latest efficiency. In 4Q20, the corporate reported $82 million in income, a acquire of 69% year-over-year, and up 34% from Q3. The corporate reported GAAP EPS of $0.05, beating the estimates by $0.02. Like Commerce Desk above, Magnite shares have come underneath strain in latest months, though the pullback has adopted an enormous run up – MGNI shares have appreciated by 458% over the previous 12 months. Trying forward, Martin sees the SpotX acquisition as the important thing right here, writing, “Collectively MGNI + SpotX will characterize the most important CTV and video advert platform (SSP) in programmatic. 67% of PF revs might be video revs (about half from CTV). By implication, MGNI will all the time be within the consideration set of SSPs for publishers which have video or CTV advert items to promote. Since digital markets are typically ‘winner take most’ markets, dimension begets dimension owing to information superiority. As information improves with scale, this creates a optimistic flywheel which places smaller opponents at accelerating AI and information disadvantages.” These feedback again up Martin’s Purchase ranking on the inventory. Her worth goal, $70, signifies her confidence in a sturdy 74% one-year upside potential. Wall Road’s analysts are principally bullish right here, as proven by the 5 to 1 break up between Purchase and Maintain evaluations, giving MGNI shares a Robust Purchase consensus ranking. The inventory has a median worth goal of $65.17, which suggests a 63% upside from the present buying and selling worth of $40.05. (See Magnite’s inventory evaluation at TipRanks.) Viant Know-how (DSP) Final on our checklist of Needham picks, Viant Know-how payments itself as a purveyor of ‘people-based promoting software program.’ The corporate gives an omnichannel demand-side platform, Adelphic, utilized by companies, manufacturers, and media consumers to execute advert campaigns on linked and linear TV, desktop and cell gadgets, and thru digital audio. Viant has been within the advert tech enterprise for over 20 years, and in February of this yr it entered the general public markets. The IPO was initially priced at $25 per share, and closed its first day’s buying and selling at over $47. The corporate bought over 10 million shares of widespread inventory, and raised roughly $213 million within the providing. Because the IPO, the inventory has slid by 31%, though the share worth stays effectively above the preliminary IPO pricing, and the corporate’s market cap is a decent $1.94 billion. In March of this yr, Viant launched its This fall and 2020 full yr outcomes – its first such launch as a publicly traded firm. For the fourth quarter, income got here in at $56.6 million, a 9% yoy improve, whereas gross earnings hit $30.5 million, up 31% from the year-ago quarter. The complete yr outcomes have been $165.3 million in whole income, just about flat from 2019, and $77 million in gross earnings, a acquire of 9% from prior yr. The corporate reported a number of attention-grabbing metrics within the quarterly outcomes, exhibiting elevated buyer use and video spend progress. Viant’s platform noticed 36% spend progress yoy in This fall, whereas the spend on CTV grew 71% within the quarter – and 70% within the full yr. For 2020 as a complete, prospects’ video spend represented 62% of the overall. Viant, Martin notes that the corporate has comparatively low publicity to the sector’s coming ‘cookie disaster,’ and writes, “…confusion over the way forward for third-party cookies is boosting incoming name quantity to DSP as a result of advert companies and types know its platform does not depend on cookies to focus on its placement of programmatic advertisements. Due to this fact, along with benefiting from the rising tide of progress that DSP shares with all different open web advert tech opponents, we consider that DSP can also be in the precise place on the proper time, as it may reap the benefits of a 4-year observe document of efficiently promoting software program that permits purchasers to buy programmatic promoting with out counting on cookies.” Martin gave the inventory a Purchase ranking and a $62 worth goal – implying an 89% upside for the following 12 months. Trying on the consensus breakdown, the general view is extra cautious; There are 5 latest evaluations, and so they break all the way down to 2 Buys and three Holds, for a Reasonable Purchase consensus ranking. The typical worth goal, nonetheless, is a bullish one; at $57.33, the determine suggests a one-year upside of 74%. (See Viant’s inventory evaluation at TipRanks.) To search out good concepts for shares buying and selling at enticing valuations, go to TipRanks’ Finest Shares to Purchase, a newly launched instrument that unites all of TipRanks’ fairness insights. Disclaimer: The opinions expressed on this article are solely these of the featured analysts. The content material is meant for use for informational functions solely. It is vitally vital to do your personal evaluation earlier than making any funding.

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