Why Magnite Stock Plunged Today
What happened
Shares of Magnite (NASDAQ: MGNI) were taking a dive today as the supply-side ad-tech platform offered disappointing guidance in its second-quarter earnings report even as results topped estimates.
As of 1:37 p.m. ET, the stock was down 34% on the news.
So what
Magnite said revenue grew 11% in the quarter to $152.5 million, while contribution excluding traffic-acquisition costs (TAC) rose 9% to $134.7 million, which was slightly ahead of estimates at $134.3 million.
Contribution from connected TV (CTV) rose 8% to $56.1 million, and contribution from digital video+ (DV+) rose 10% to $78.6 million.
Gross profit in the quarter plunged from $72.8 million to $22.4 million, though that was due to $53 million in non-cash accelerated-amortization expense from its platform consolidation. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) fell from $41.3 million to 37.3 million in part due to $4.5 million in bad-debt expense from the bankruptcy of MediaMath, a demand-services platform (DSP).
On the bottom line, the company reported adjusted earnings per share of $0.09, down from $0.14 in the quarter a year ago but ahead of estimates at $0.03.
CEO Michael Barrett said,
We delivered a solid second quarter, with both total contribution ex-TAC and CTV contribution ex-TAC growing high single digits. We continue to grow our market share in both CTV and DV+, as well as launching new products and services to better serve our partners.
Now what
Weak guidance seemed to be the real reason Magnite shares plunged today. For Q3, management sees contribution ex-TAC of $128 million to $132 million, which was below estimates at $138.3 million, and it called for adjusted EBITDA of $34 million to $40 million, which is flat sequentially.
For the full year, its sees contribution growth in the mid-to-high single digits and flat adjusted EBITDA.
Magnite's guidance and the sell-off in the stock seem to reflect the broader struggles in the digital-ad market. Investors will have to be patient, but the company could be a big winner from growth in CTV as the ad market normalizes.
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Jeremy Bowman has positions in Magnite. The Motley Fool has positions in and recommends Magnite. The Motley Fool has a disclosure policy.
