The rise of digital ad spending is driven by the increased use of digital devices such as smartphones, tablets, and laptops and the growing global internet penetration. Consumers spend significant time on digital platforms, making these channels highly attractive for advertisers to connect with their audiences in real-time. 

Customers also seek personalized and targeted advertising messages that resonate with their needs and interests. This has led to the rise of programmatic advertising, which uses data analytics and algorithms to deliver tailored advertisements to individual consumers. Ad spending in the advertising market worldwide is forecasted to reach $1.16 trillion in 2025.

Against this backdrop, let’s compare two advertising stocks to analyze which stock is the superior investment: Taboola.com Ltd. (TBLA) and Magnite, Inc. (MGNI).

The Case for Taboola.com Ltd. Stock

With a $1.20 billion market cap, Taboola.com Ltd. (TBLA) operates an artificial intelligence-based algorithmic engine platform in Israel, the United States, the United Kingdom, Germany, and internationally. It offers Taboola, a platform that partners with websites, devices, and mobile apps to recommend editorial content and advertisements on the open web to users. 

TBLA’s stock has gained 8.8% over the past six months to close the last trading session at $3.58.

TBLA’s 1x trailing-12-month asset turnover ratio is 103.6% higher than the 0.49x industry average.

TBLA’s total revenues increased 20.2% year-over-year to $433.01 million during the third quarter that ended September 30, 2024. Its gross profit grew 32% from the year-ago value to $132.88 million. Also, the company’s operating income for the quarter amounted to $4.56 million.

In addition, the company’s non-GAAP net income came in at $22.21 million, up 231.3% year-over-year. TBLA’s adjusted EBITDA rose 109.9% from the prior-year period to $47.93 million. Its free cash flow increased 88% from the year-ago value to $42.86 million.

Also, the company’s cash and cash equivalents stood at $217.23 million as of September 30, 2024, compared to $176.11 million as of December 31, 2023.

Analysts expect TBLA’s revenue for the fourth quarter (ended December 2024) to increase 13.6% year-over-year to $476.82 million. The consensus EPS estimate of $0.15 for the same quarter reflects a 74.2% year-over-year improvement. Furthermore, the company has surpassed the consensus revenue and EPS estimates in three of the trailing four quarters.

TBLA’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

The stock has a B grade for Growth and Value. TBLA is ranked #2 out of 16 stocks in the Advertising industry.

In addition to the POWR Ratings I’ve just highlighted, you can see TBLA’s ratings for Momentum, Stability, Quality, and Sentiment here.

The Case for Magnite, Inc. Stock

Valued at $2.26 billion by market cap, Magnite, Inc. (MGNI) operates an independent omni-channel sell-side advertising platform in the United States and internationally. The company’s platform offers applications and services for sellers of digital advertising inventory or publishers that own and operate CTV channels, applications, websites, and other digital media properties to manage and monetize their inventory

Shares of MGNI have declined 2.3% over the past month but gained 30.6% over the three months to close the last trading session at $16.09.

In terms of the trailing-12-month CAPEX/Sales, MGNI’s 5.85% is 61.7% higher than the 3.62% industry average. However, its 6.96% trailing-12-month EBIT margin is 31.2% lower than the 10.10% industry average.

MGNI’s revenue increased 8% year-over-year to $162 million for the fiscal 2024 third quarter that ended September 30, 2024. Moreover, the company’s net income came in at $5.20 million and $0.04 per share.

For the fourth quarter ending December 2024, MGNI’s revenue is expected to increase 11.4% year-over-year to $184.12 million. Its EPS for the ongoing quarter is expected to increase 35.9% year-over-year to $0.39. Moreover, the company surpassed revenue estimates in each of the trailing four quarters.

MGNI’s fundamentals are reflected in its POWR Ratings. The stock has an overall C rating, translating to Neutral in our proprietary rating system.

MGNI has a C grade for Growth, Value, Sentiment, Quality, and Stability. It is ranked #7 in the same industry.

Click here for the additional POWR Ratings for MGNI (Momentum).

Taboola (TBLA) vs. Magnite (MGNI): Which Advertising Stock Is the Superior Investment?

Customers worldwide are increasingly gravitating towards digital advertising channels, such as social media, online videos, and mobile ads. This shift can be attributed to the widespread adoption of smartphones and internet connectivity, which has resulted in a higher level of engagement with digital content. 

Leading advertising companies TBLA and MGNI stand to capitalize on the optimistic industry outlook. However, TBLA’s strong profitability might make it the better advertising stock pick.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Advertising industry here.

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MGNI shares were trading at $15.21 per share on Thursday afternoon, down $0.88 (-5.47%). Year-to-date, MGNI has declined -4.46%, versus a 1.15% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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