A jaw-dropping deal is here
Jamie Louko (Pubmatic): The market has brought many bargains to long-term investors, but there are perhaps none better than Pubmatic. The company is one of the leading supply-side platforms in the digital advertising space, helping publishers fill their available ad inventory.
Pubmatic shares have gotten hammered in 2022, falling 60% year to date. This makes sense, given the challenging macroeconomic situation weighing on businesses. When companies need to cut back budgets, advertising is one of the easiest places. Therefore, Pubmatic has been hurt. However, investors might have sold off this company too harshly: The company now trades below 17.5 times earnings, far lower than other advertising technology companies.
The activity Pubmatic has seen on its platform is expected to slow in Q4, but the company’s profitability figures are still something to get excited about. While the vast majority of small, fast-growing tech stocks are unprofitable, Pubmatic has remained profitable and cash generative, even during this uncertain macro environment. Over the trailing 12 months, the company has maintained a net income margin of 17% and a free cash flow margin of 19%.
This is expected to continue into Q4. Management is forecasting an adjusted EBITDA margin of 45%, which is actually a jump from the Q3 figure of 39%.
The company’s adoption might slow in Q4, but that seems only temporary because the long-term future for this industry looks incredibly bright. By 2024, Pubmatic expects global digital advertising spending will reach $627 billion. Considering the company controlled roughly 3.5% of this space at the end of 2021, it could flourish over the long haul and see adoption pick back up in 2023 and beyond. With high profitability and a greenfield opportunity ahead, Pubmatic looks like one of the best deals on the market today.
