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PubMatic: After Being Up 30%, I Remain Highly Bullish

Jan. 03, 2022 8:11 AM ETPubMatic, Inc. (PUBM)MGNI, PERI, TRMR, TTD44 Comments
EE Investing profile picture
EE Investing


  • Due to a great third quarter, PubMatic’s share price has been up by 30% since my very bullish article in September.
  • The bullish thesis becomes gradually stronger as the company continues to outperform peers and rapidly shows investors that it is best-in-class.
  • Moreover, instead of having a negative impact on PubMatic's business, Google’s policy change might turn out to be a hidden opportunity.
  • Compared to its peers, PubMatic still offers the best price-to-value ratio in an already cheaply valued industry.

Analyst working with Business Analytics and Data Management System on computer to make report with KPI and metrics connected to database. Corporate strategy for finance, operations, sales, marketing

NicoElNino/iStock via Getty Images

In September I have written a very bullish article on PubMatic (NASDAQ:PUBM). Despite the 30% increase in the stock price, I remain highly bullish on the company and want to share additional reasons which I did not

This article was written by

EE Investing profile picture
My Background: Grew up in Germany, working and living in China. MSc in Finance. Years of experience in strategy consulting and finance.Stocks that I cover usually have market caps between $10M and $25B and fall into one of the two categories below:Category A - Asian stocks: I work and live in China, am able to speak Mandarin, and therefore can provide readers with unique insights. I believe especially Chinese stocks are extremely mispriced. Some companies are obvious scams and/or trade for far too high valuations, and some stocks are growing rapidly have P/E ratios of below 3 and are debt-free. Most of my profits I earn in this category. (recent examples are FINV, YRD, VIPS or HUYA)Category B - Growth at a reasonable price: As I do not want my whole portfolio to be exposed to Asia, I also analyze a lot of US stocks. My focus is on, often undercovered, growth companies that are in the best case already profitable and available for a reasonable price. (recent examples are PUBM, GPRO or MED)(Important Note: My articles and comments are not intended to be investment advice. Please do your own due diligence before making investments in any security.)

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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Comments (44)

ayv profile picture
If I’m not mistaken, MGNI is the preferred SSP of $DIS. I believe there will be multiple winners in this space. My money is in MGNI & PUBM.
Still looking for an answer as to how Perion is barely profitable but Pubmatic is not. I don't want to be a pain but you shouldn't write articles with other stocks in it if you're not doing your research. You pretty much admit you did no research on Perion which has the best growth profile in the space while guiding for $1B in revenue by 2025.

Pubm long but I'm honestly struggling to see why I am since this article comparison is not really accurate. I have much more Peri and MGNI but would add more Pubm if it made sense.
Crayfishkaliari profile picture
@Kamaal yet you offer nothing
EE Investing profile picture
@Kamaal Hi Kamaal, I've been researching only Perion since I've published this article, and I'm almost done with my analysis ;-)What I have found so far is that Perion is also a great company.

My comparison above is actually not fair towards Perion, as I found out that PUBM reports net revenues (= excl. traffic acquisition costs), while PERI reports gross revenues (incl. traffic acquisition costs).

By adjusting these costs here is a summary of a fairer comparison:
- PUBM is 20% larger than PERI
- PERI has almost identical profitability as PUBM (20-30% EBIT Margin)
- PERI spends more on R&D (I'd assume due to the lower cost staff of PUBM), but less on COGS (as PUBM has large D&A expenses for its internal IT infrastructure)

I am bullish on both PERI and PUBM (especially after the drop from last week) - hope that helps
@EE Investing I think more important than any of what you listed is that is that PERI is growing substantially faster (35% CAGR for PERI vs 24% CAGR for PUBM 2020-22), trading substantially cheaper (PERI 2.7 ex-tac revs vs 5.8 for Pubm) (10.5 EV/EBITDA for PERI vs the 24 you have here for PUBM), and doing so at increasing profitability that rivals the much larger The Trade Desk. PERI went from guiding for $35M EBITDA for 2021 in January to $65M in December. This January they're guiding for $82M EBITDA for 2022 and who knows what they will guide for by December. Your graph is wrong for PERI since you have net cash wrong, which means the enterprise value is wrong and you have their trailing 12 months earnings wrong so you have their EBITDA wrong.

Bullish on both as well (must admit the much smaller PUBM position is mostly because it seems to be drawing more interest than it deserves) but PERI is clearly the better option. The stock was up almost 90% last year and is still by far the most undervalued stock in the space. They could have $100M in EBITDA at the end of 2022 and the stock's cap is $930M.
Why has PUBM received a deficient notice today about its NASDAQ listing? "Deficient: Issuer Failed to Meet NASDAQ Continued Listing Requirements" Can anyone comment on this?
Zorgo profile picture
@JackMerde one of the directors died in December. RIP. This is a standard notice/procedure.
@JackMerde They should have another Director hired by the annual meeting. They have a year to get a replacement and be compliant again. No big deal.
svisci profile picture
Hello everyone....recently price fall under 28 dows create opportunity but based on tech chart it can go even lower...25 is possible
Crayfishkaliari profile picture
News on CNN? eek grow up and get with the times
What Is fair value for pubm 12 months from now
@12grayzz The revised price from RBC is 46 , down from 56, but still outweigh
Would like to hear your view on Tremor in comparison to Pubmatic
GARPdude profile picture
@Holgerbb Did you read the article? His view is right in there.
solidstockmove profile picture
PUBM story shows interesting; but I will not touch it as it is going under 200-MA. I keep my rules. Bought some PERI today instead.
I'm most bullish on APPS, although it doesn't directly compete with these names as it's not in CTV and rather on mobile.

I'm invested in magnite, pubmatic, tremor, perion, and acuity. I don't know who the winner/s will be so almost 20% of all my money is split for now between these 5. I'm not worried about magnite being profitable it has good margins and strong cash flows (for now). PERI and TRMR are trading basically dirt cheap by traditional metrics.

Long game these companies will either merge or will all do pretty well.
@jvpiter Peri is trading at dirt cheap valuation. I do not understand why nor do I need to. Apps, Pubm and peri should all do well but likely all of them will. Imagine 5 years from now the ad spend online will be massive.
@jvpiter Kindly explain how acuity fits in; what about APPS...love it.
@jvpiter Because PERI and TRMR are in Israel, they have a higher discount rate. If I use 8% WACC for PUBM, I'll slap a 13% WACC for PERI and TRMR. Based on that, these companies trade at similar a discount to intrinsic value.

I still think Pubmatic is a Ferrari, and PERI/TRMR Chevys. There are levels to this.
pubm is so unique vs PERI/MGNI is that they have India background as they were funded by VC from India, and India online advertising market is huge and it gives PUBM such an advantage vs Israel based Peri or US based MGNI. Plus they built everything internally with India based talent which indeed pave the good foundation for long term growth
@hpad06 This is good to know; I mean if it's accurate that they do business in India then this is a huge advantage. In fact this by itself can drive decades of growth if they are and stay very relevant there.

India is a difficult market for US investors to get exposure of.
@jvpiter this is from one of the article

In India, we work with some of the large publishing houses such as Times Internet, HT Media, and Network18 besides OTT players such as ZEE5, MX Player, and Voot and apps such as Truecaller, Dailyhunt, and Sportskeeda.

The size of the market is large and the growth is also pretty significant. The Indian digital advertising market is growing at a CAGR of 27% and it is expected to touch Rs 50,000 crore by 2024.
Rajeev Goel is a great Founder/CEO..this to me is as important as any valuation or business kpi. Glassdoor ratings confirm and culture seems very strong at Pubmatic. I also own Digital Turbine
@MUGSLEY Digital Turbine seems like it has the most potential for outsized gains in the next few years: cheap, doesn't have much competition in its space, is already on 100s of millions devices, and has had 100% rev. growth in 2021. Seems like a path to several billions in revenue is pretty clear; so not sure why the company is trading so low. I think it can 2-3x in like 1-2 years.
Great analysis. As a 20+ year digital marketing veteran, agree that PUBM has the best/most sustainable model for the currently evolving ad market landscape.
EE Investing profile picture
@Snowkarver Great input - thanks for commenting!
Finnvestor77 profile picture
Btw. Perion has net cash $295m - not $155m. $0 debt too.
EE Investing profile picture
@Finnvestor77 Hey there, Perion has $95M cash, $60M short-term deposits, and no debt. You can check their latest earnings release here:

@EE Investing they have recently issued shares to raise over $150M.
I own all of them except MGNI :)
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