The Bull Case For PubMatic

For PubMatic, the online advertising software company that develops and implements strategies for online publishers and advertisers, the bull case is compelling.

By helping publishers of websites, apps, and videos to get in touch with ad buyers automatically through suggestions made by observation of user data, PubMatic offers a valuable tool for both advertisers and publishers alike.

After going public on the NYSE back in December of 2020, the stock has proven itself more than worthy of a bull case. Let’s look at why.

PubMatic: 88% Increase in YoY Revenues

For the second quarter of 2021, PubMatic saw revenue of $49.7 million dollars. This is an 88% increase over the second quarter of 2020, which is a truly remarkable feat given the troubles caused by the ongoing coronavirus pandemic on countless companies on the NYSE.

65% of this revenue came from mobile and omnichannel video advertising alone, a 108% growth year-over-year.

These numbers make PubMatic extremely attractive to investors, and for a good reason: PubMatic is currently excelling in the ever-changing world of advertising, and the proof is in the company’s financials. 

PubMatic’s Growth Set To Continue

PubMatic’s 108% growth is nothing to scoff at, especially these days when so many businesses seem to be really struggling to achieve any sort of growth in such tumultuous times.

Impressively, PubMatic and its investors only seem to think that this growth is going to continue in the coming quarters.

Mobile video is an ever-growing industry, and as such, PubMatic predicts to see this format — which already accounts for 65% of their Q2 revenue — continue to grow going forward.

This is a major part of the bull case for PubMatic: They haven’t just grown substantially this quarter, they show all sorts of signs that growth is going to remain a constant in quarters to come.

The Future of PubMatic

As far as the future of PubMatic is concerned, looking beyond just the next quarter, things are looking as bright as you might think.

PubMatic predicts third quarter revenue to be somewhere between $51 and $53 million, while financial analysts predict a few million slightly less than that.

If they’re correct, this will be a growth of over 35% compared to the third quarter of 2020. By the end of 2021, PubMatic predicts to see a year-end revenue of $205 to $209 million — a year-over-year growth of nearly 40% compared to 2020.

CTV Trends Favor Pubmatic

A CTV is an abbreviation for “connected TV” — If you haven’t heard of them by that name before, you’ve certainly heard of them by their slew of different brand names. Whether it be Roku, Amazon Fire TV, Apple TV, or a gaming system like Xbox or PlayStation, a CTV is a television with a device attached or built into it that enables streaming of video content.

This CTV market has been on the rise in recent years, and PubMatic has seen some exceptional numbers because of it — so much so, in fact, that PubMatic is confident enough to say that CTV will help grow its revenue by 25% in 2022.

As CTVs continue to trend skyward, PubMatic — and bullish investors in PubMatic — feel quite confident in the company’s ability to grow exponentially in the coming quarters.

Is PubMatic Building or Buying?

There are two main ways a company can grow: by building or by buying. The former requires investing in the company itself, and the latter requires investing in smaller companies and bringing them into the fold.

Each comes with its own unique set of pros and cons, and it’d take quite a bit of time to get into them all. The real question is this: Is PubMatic building or buying? And how does that impact the bull case?

Simply put, PubMatic greatly prefers to build instead of buy. This is a testament to the confidence PubMatic has in its own abilities, and speaks volumes to their unique approach to ad buying and ad spending.

Instead of taking on another company and trying to integrate it into the PubMatic way of life, PubMatic would rather build on what has already been built.

This is fuel for bullish investors, because it shows that PubMatic knows exactly what it’s doing and exactly how it wants to do it.

How PubMatic Is Solving Addressability

One potential factor that could impact PubMatic quite a bit in the coming quarters is the idea of addressability. For the longest time, internet advertisers have relied on user data to determine where their target audience is online and what kind of activities they do on the internet in order to better address them with ads.

As the way user data is gathered continues to change as new legislation is passed around the world, some investors might fear what these new and future laws could do to PubMatic’s business model.

However, PubMatic and bullish investors seem to feel good about the company’s investment in targeted ad solutions that don’t rely on things like cookies.

The Bottom Line: What Is the Bull Case for PubMatic?

So, when all is said and done, what does the bull case for PubMatic boil down to? For starters, there’s the company’s excellent financials and the solid predictions for its upcoming quarters.

Then, there’s the promising growth PubMatic continues to show quarter after quarter despite an ever-changing ad field.

Beyond this, there’s the increasing popularity of CTV, and the fact that PubMatic continues to grow its own abilities in-house instead of buying up smaller companies.

Despite upcoming challenges to the online ad industry at large, both PubMatic and bullish investors in the company will argue that there’s not much that could put a stop to this company’s recent hot streak.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.