On Wednesday, Evercore ISI has increased the price target for PubMatic Inc (NASDAQ:PUBM) to $22 from the previous $20, while maintaining an Outperform rating. This adjustment follows PubMatic's third-quarter earnings, which surpassed expectations with robust results.
The company's Q3 revenue and EBITDA significantly outperformed estimates, attributed to several key growth drivers. A notable surge in Omnichannel Video strength, particularly from Connected TV (CTV), was highlighted, with CTV monetized impression volume doubling year-over-year for the third consecutive quarter.
Additionally, PubMatic enjoyed a boost from higher-than-anticipated Political Ad Revenue, estimated to contribute 3-4% to the quarter's performance.
Continued momentum was also seen in Mobile App growth, which increased by over 20% year-over-year for the fourth straight quarter. Emerging revenue streams further contributed to the quarter's success, adding a 3-point benefit. Despite these positive developments, a headwind was noted due to a Demand-Side Platform (DSP) bidding change, which is projected to affect reported growth until mid-2025.
Evercore ISI's long-term thesis on PubMatic remains unchanged, viewing the year-to-date underperformance as an opportunity for investors ahead of anticipated catalysts in fiscal year 2025.
These catalysts include continued CTV growth, scaling partnerships with companies like X, AppLovin (NASDAQ:APP), Roku (NASDAQ:ROKU), and Roblox, softer comparisons in the second half of 2025, and a more significant contribution from Emerging Revenue streams such as Activate, Connect, Convert, and OpenWrap. Following the announcement, PubMatic's shares saw an approximate 3% increase in after-market trading.
Evercore ISI concludes its positive outlook on PubMatic, emphasizing the potential for growth and market opportunities in the coming years.
In other recent news, digital advertising technology company, PubMatic, reported a 13% increase in revenue in the third quarter of 2024, driven by robust demand in Connected TV (CTV) and political advertising. The company's adjusted EBITDA came in at $18.5 million, a 26% margin, and the full-year revenue guidance was raised to between $292 million and $296 million.
Bearish notes highlighted a $7 million headwind from DSP changes and macroeconomic conditions. However, PubMatic anticipates sustained growth across key sectors, including CTV and mobile, with Q4 revenue projected to be between $86 million and $90 million. The company plans to continue leveraging AI for product innovation and to expand in the open Internet ad space.
In bullish highlights, the company's omnichannel video revenue grew by 25%, with CTV impressions more than doubling. PubMatic maintains a strong financial position with $140.4 million in cash and no debt and has repurchased 7.6 million shares since February 2023.
Looking ahead, the company's focus for 2025 will be on efficiency and targeted hiring, with no significant increase in headcount expected.
InvestingPro Insights
PubMatic's strong performance and Evercore ISI's optimistic outlook are further supported by real-time data from InvestingPro. The company's market capitalization stands at $814.67 million, reflecting its solid position in the digital advertising technology space. PubMatic's revenue growth of 9.6% over the last twelve months as of Q2 2024 aligns with the positive trends highlighted in the article, particularly the growth in CTV and mobile app segments.
InvestingPro Tips reveal that PubMatic holds more cash than debt on its balance sheet, indicating financial stability as it pursues growth opportunities in emerging revenue streams. This strong financial position supports the company's ability to invest in partnerships and new technologies, as mentioned in Evercore ISI's analysis.
Another InvestingPro Tip notes that PubMatic is trading at a low P/E ratio relative to near-term earnings growth, with a PEG ratio of 0.12. This suggests that the stock may be undervalued considering its growth prospects, which could explain Evercore ISI's view of the year-to-date underperformance as an opportunity for investors.
For readers interested in a deeper analysis, InvestingPro offers 9 additional tips that could provide further insights into PubMatic's financial health and market position.
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