Pubmatic Stock is an AdTech Reopening Play

Digital advertising technology (AdTech) platform Pubmatic NASDAQ: PUBM stock has recovered with the post-pandemic reopening. The Company raised its Q4 2021 and full-year revenue guidance as it pursues many growth drivers including Supply Path Optimization, audience addressability, and high growth formats including mobile, online video, closed television (CTV) and it's owned and operated infrastructure. Revenues are still rising at tepid double-digit rates as it emerges as an industry leader in adtech. CTV revenues rose 7X in Q3 2021 over the year-ago same period as publishers like Crackle and Newsy initiated their deployment with Pubmatic. The Company believes every major advertising agency will engage in supply path optimization. Prudent investors seeking exposure in the evolving adtech segment can watch for opportunistic pullbacks in shares of Pubmatic.

Q3 FY 2021 Earnings Release

On Nov. 9, 2021, Pubmatic released its fiscal third-quarter 2021 results for the quarter ending September 2021. The Company reported an earnings-per-share (EPS) profits of $0.24 beating analyst estimates of $0.08 by $0.16. Revenues rose 53.7% year-over-year (YoY) to $58.1 million, beating analyst estimates for $52.43 million. CTV revenues grew more than 7X over Q3 2020. Net dollar-based retention was 157% for the trailing twelve months (TTM) ending September 31, 2021, up 110% YoY. Pubmatic CEO Rajeev Goel commented, ““We delivered record revenue in the third quarter, well ahead of our expectations. This quarter marks our fourth consecutive quarter of organic revenue growth above 50% and adjusted EBITDA margin over 30%. We use a land and expand approach, coupled with a usage-based revenue model. When we deliver incremental value to our customers, we participate in their upside which further accelerates our profitable business model and enables us to invest for future growth. This flywheel positions us well for sustained and profitable growth and market share gains.”

Raised Guidance Estimates

Pubmatic raised its guidance for Q4 2021 revenues to come in between $74 million to $76 million versus $62.23 million consensus analyst estimates. The Company raised full-year 2021 revenue to come in at least $281 million versus $260.02 million analyst estimates.

Conference Call Takeaways

Perion CEO, Rajeev Goel set the tone, “There are two key market dynamics underway that are fueling our strong results. First, just as the demand side of the ecosystem consolidated over the last five years, the sell side is actively consolidating at a rapid rate, with clear winners emerging based on innovation and value delivery to customers. And second, the market continues to grow at a rapid pace, with elevated digital ad spend expected for the foreseeable future. On the back of these trends, I'm pleased to share that our latest results marked four consecutive quarters where we have exceeded both 50% year-over-year revenue growth and 30% adjusted EBITDA margins.

He addressed the elephant in the room, “ Before I go further, I would like to address the recent industry concerns about the impact of Apple's removal of the IDFA. This is not an industry-wide issue. iOS-based advertising is a small part of our business, mid-single digits on a percent of revenue basis. So its impact at most is very limited for us. We are a well-diversified omnichannel platform with scale in mobile web, desktop, and CTV, which includes OTT as well as iOS and non-iOS app environments. Equally important, we have anticipated Apple’s and other similar changes for several years and have been hard at work innovating to get ahead of them. For example, our Identity Hub and Audience Encore solutions, which bring valuable identity and first-party data to our platform continue to scale aggressively. Over two-thirds of our revenue has alternative identifiers to the third-party cookie and Apple's IDFA in place, up from a majority of revenue at the end of Q1. At a macro level, we are a brand advertising platform first and a direct response platform second. So, conversion-based attribution and associated measurement challenges are relatively less impactful for us. And finally, we have a well-diversified set of advertiser verticals on our platform.” He concluded, “Over the next three to five years, we believe every major agency and advertiser and many of the smaller ones will engage in supply path optimization. We are one of only a couple of sell-side platforms that meets buyers' needs, buyers' criteria for being global omnichannel and independent of any owned media. Our strategy with publishers is to continuously innovate and deliver more products that allow our publishers to increase the monetization of their ad inventory, whether through higher CPMs or through monetization of incremental ad impressions… The omnichannel, global, and independent nature of our platform positions us to capitalize on a large and growing addressable market, with significant runway ahead of us to grow our market share. We continue to invest aggressively in a variety of growth initiatives, such as Supply Path Optimization, audience addressability, and high-growth formats like CTV, mobile, and online video, as well as our owned and operated infrastructure, in order to enhance our moat and grow customer usage.”

PUBM Opportunistic Pullback Levels

Using the rifle charts on the weekly and daily time frames provides a precision near-term view of the playing field for PUBM shares. The weekly rifle charts are still materializing but the 5-period moving average (MA) has gone flat near the $52.95 Fibonacci (fib) level. The weekly stochastic, 15-period MA and Bollinger Bands are still in the development stage requiring more weekly candle closes. The daily rifle chart formed a bearish inverse pup breakdown with a falling 5-period MA at $50.46 as the weekly stochastic cross back down towards the 20-band. Th 15-period MA sits at the $56.97. The daily market structure low (MSL) buy triggers above the $56.97 but the opposing weekly market structure high (MSH) sell triggered under $64.06. The daily inverse pup breakdown presents opportunistic pullback levels at the $44.01 fib, $41.55 fib, $39.39 fib, $37.55 fib, and the $35.76 fib. The upside trajectories range from the $56.97 daily MSL trigger up to the $74.79 fib. Keep an eye Magnite NASDAQ: MGNI and The Trade Desk NASDAQ: TTD as sympathy stocks that move together.