This quarter, we chose to go over Roku, Snap, PubMatic, The Trade Desk, Magnite, Pinterest, and Digital Turbine for an earnings preview on what to expect from these ad-tech companies. This list was chosen by those with the most forward growth, those with the highest valuations or those that have recently completed an acquisition so we can look deeper into what the Street is expecting from management.
Roku Inc– Earnings on November 05th
Below is a chart of Roku’s financials from last year, last quarter and what is expected in the upcoming quarter.
The consensus estimates suggests that the revenue growth will be slowing down in the next quarter. Below are the analysts’ views on Roku.
- Wells Fargo analyst Steven Cahall has recently downgraded the stock to Equal Weight and reduced the price target from $488 to $350. He states that "The primary reason we go from Overweight to Equal Weight is, while there may still be a long ARPU runway, it's far better understood," Cahall writes in a note. "Consensus CY22E/CY23E ARPU is +50%/+47% over the past year to now $50/$60. In our January deep dive, we called CY22E ARPU of $55 a bull case scenario; but current consensus shows our alpha has decayed. The Q2 ARPU beat slowed a lot from Q1."
- On the other hand, Guggenheim analyst Michael Morris says that the recent sell-off is a good opportunity to buy the shares as he upgrades the stock from a neutral rating to a buy with a price target of $395. “We expect the connected television ad marketplace will continue to grow at a rapid pace and that Roku will be a primary beneficiary — this view is unchanged,”
- KeyBank analyst Justin Patterson has said that the New Amazon fire TV’s as an incremental positive to the company and its competitive position. He notes that Amazon’s devices appear to be similar to Roku’s offering.
Please note, the I/O Fund does not necessarily agree with the financial analysts mentioned above rather our goal is to objectively review companies. Our premium members have been updated frequently on Roku and we have been able to buy this stock very early before the market understood the true potential of this cord-cutting and AVOD play.
You may view our previous analysis on Roku below:
Video: Is the Bottom in for Roku?The Crucial Difference Between Roku and NetflixWill Roku Go Boom or Bust This YearRoku’s Stock Price: Will There Be Another Pullback?Roku Q3 Earnings: Choppy But Unshakeable Long-TermUpdate on $ROKU – Will Roku Miss Earnings?3 Reasons Why Roku Will Be The Next Tech DarlingHere’s Why Roku Stock Will Surpass $100 In Next Two YearsLong on Roku – Even if they Miss Q1 Earnings
PubMatic Inc – Earnings on November 15th
PubMatic revenue growth rate is expected to show a notable deceleration in comparison with the recent quarter although margins remain high. We will be keeping an eye on the net dollar-based retention ratio in the next quarter. The management has raised the 2021 revenue growth forecast to 38% to 40% and 25% next year.
Macquarie analyst Tim Nollen has an outperform rating on the stock with a price target of $37. He believes that the company benefits from “a strong advertising backdrop in which traditional advertising is shifting to digital, open Internet players are gaining share from walled gardens, and ad spend is consolidating around fewer SSPs,".
Macquarie further states “PubMatic is banking on real CTV growth coming from open exchange, where the OpenWrap bidding engine will be able to grow alongside that migration - though that still needs time to play out”.
“And on an enterprise value/sales basis, it's trading at roughly a 3.5x discount to its closest peer, Magnite and a 5x discount to the broader ad-tech universe.”
You can find the ad-tech companies which had their growth estimates updated in the last few months here.
The Trade Desk Inc – Earnings on November 05th
The consensus revenue estimates for the next quarter suggests a sharp drop in the revenue growth, as well. One of the primary reasons for the strong revenue growth in the second quarter was due to lower comps as Q2 2020 revenue fell 13% YoY.
Needham analyst Laura Martin has a buy rating with a price target of $100 and her 3Q21 revenue estimate is $284M.
She is of the view that “Digital markets have proven themselves to have winner-take most economics, and we believe TTD is the winner among DSP’s (demand side platforms). 30% of TTD’s revenues come from CTV which should accelerate TTD’s growth trajectory since CTV revenues are growing 3-5x faster than other digital media categories. About 15% of TTD’s 1H21 revenues came from outside the US, and offshore is growing faster than the US, suggesting a longer growth runaway”. Sign up for I/O Fund's free newsletter with gains of up to 1100% - Click here Click here
Citi analyst Nicholas Jones has a price target of $85 and a neutral rating. He believes: “Trade Desk is a dominant and best-in-class adtech player, but continues to see risk associated with technology disruption and privacy regulation”.
You can view our previous analysis below:
The Trade Desk: Effects Of Lower Ad Demand In 2020
8 Predictions For Tech Stocks In 2020
Snap Inc – Earnings on October 21st
The revenue growth is expected to be lower than the second quarter but higher than the previous year. The adjusted EBITDA in the second quarter showed a strong growth when compared to the previous year. The management also expects to show an improvement in the third quarter.
Goldman Sachs’ analyst believes that the company has a high chance to achieve its target of 50% plus revenue growth in the next three years. Goldman Sachs also believes that the strong growth will be accompanied by margin expansion with the EBITDA margins improving from -13% in 2021 to 40% in 2026. It has a price target of $90.
