PUBM looks like an interesting play via /r/wallstreetbets #stocks #wallstreetbets #investing


PUBM looks like an interesting play

TL/DR Pubmatic is a buy IMO

Pubmatic has seen its revenue rise consistently for the past four years. Even so, PubMatic shares are trading around $26 at the time of this writing, far below their 52-week high of $76.96. A key factor impacting the stock price is the massive change happening in the digital advertising industry.

With Apple and Google changing the way consumers are tracked, there is a lot of FUD around the online advertising business but IMO this creates a buying opportunity. I’m not going to try to convince you guys that I have a firm grasp on this business. Instead I’m going to regurgitate a bunch of stuff that I read on Motley Fool and Creating Alpha.

PubMatic’s cloud-based advertising platform helps content creators, called publishers, efficiently sell the ad space appearing alongside their website and app content. In return, publishers pay fees to PubMatic. By catering to publishers, PubMatic obtains first-party data about the audiences viewing this content for use in its platform. So while Google’s impending ad targeting changes, set to happen next year, may hurt ad tech firms reliant on Google’s data, PubMatic will largely maintain the targeting insights needed to deliver results to clients. In the first full quarter after Apple changed their privacy policy PUBM recorded record revenue with a 54% increase yoy.

Revenue grew 15% in 2019, 31% in 2020 and 54% in 2021. Now if you’ve read this far you get to hear the kicker. This is a high growth company but get this: THEY MAKE MONEY! And the amount that they make has been steadily growing. In 2021 their fully diluted EPS was $1.00 so they are trading at a p/e of about 26 and a price/sales of 8.5. These numbers are unheard of for a growth company like this. Compare them to TTD (not really a competitor but in the same business) with p/e of 249 and price to sales of 38.18 and I think this is a steal.

Position: short 10 x $40 PUBM puts 01/23 and long $12.50 PUBM calls 01/23 also, because I like to buy an industry, short: 10 x $22.50 MGNI puts 01/23 and long $7.50 MGNI calls 01/23.

Submitted March 30, 2022 at 11:43PM by johnfromvancouver
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