Key ad-tech reports likely to impress after big tech shows market's holding up – Macquarie – Seeking Alpha

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anyaberkut/iStock via Getty Images

anyaberkut/iStock via Getty Images
Earnings from big tech and ad agency names last week are setting up well for the advertising technology space, Macquarie says as the companies get ready to report their fourth-quarter earnings.
Last week was a heavy reporting week for tech giants, with reports from Apple (NASDAQ:AAPL), Google (GOOG, GOOGL), Snap (NYSE:SNAP), Amazon.com (NASDAQ:AMZN) and Meta Platforms (and Meta (NASDAQ:FB) is the outlier there after a four-day slide).
Ad giant Publicis Groupe also reported and beat revenue expectations, the firm notes. And while many investors are looking at Meta as a dim harbinger for ads and ad-tech, the social-media giant looks like it’s facing company-specific problems with Apple privacy changes and the IDFA ad identifier, Macquarie’s Tim Nollen says.
That means the overall ad market backdrop aside from Meta/Facebook is “solid.” Ad growth was 32-42% at Google, Amazon and Snap, and Unity’s (NYSE:U) ad monetization business grew 45%, the firm notes.
It says Unity benefited from Meta’s loss of share; Meta’s 20% growth included an 8% hit from Apple’s IDFA restriction. And Unity points the way toward Macquarie’s expectations for several companies reporting in coming days: ongoing top-line growth at a 25-30% pace, with profitability becoming more important (note Snap’s pop on a turn to profit).
Unity’s in-app ad specialist peers should see good growth for Q4, Macquarie says, including AppLovin (NASDAQ:APP), Digital Turbine (NASDAQ:APPS) and ironSource (NYSE:IS). (And Digital Turbine in fact logged 38% pro forma growth in revenues in its report Tuesday afternoon.)
Meanwhile, the companies with diversified ad bases and media channels should also demonstrate some resilience, the firm says; here it names The Trade Desk (NASDAQ:TTD), Magnite (NASDAQ:MGNI) and PubMatic (NASDAQ:PUBM).
Valuations have fallen across the board, along with broader high-growth software stocks, Macquarie notes. On Nov. 1, the group of AppLovin, Digital Turbine, Criteo (NASDAQ:CRTO), ironSource, Magnite, PubMatic, LiveRamp (NYSE:RAMP), Roku (NASDAQ:ROKU), The Trade Desk and Unity traded at an enterprise value multiple of 12x 2022 sales. They’re now trading at 8.5x, a 28% decline.
As for tidbits on key individual names, the firm says AppLovin (APP) has been the top performer in mobile gaming ads, and its report will mark the first where it cycles against introduction of its Axon AI launch. Criteo (CRTO) has traded sideways since an early 2021 rally but results have been “consistently good” and the stock is at “the bottom of the valuation heap.”
Magnite (MGNI) had a somewhat disappointing Q3 and “has some proving to do”; if it overcomes some soft spots it looks cheat at 4.8x 2022 EV/sales. Roku (ROKU) is facing a number of legitimate concerns, including tough comps, supply-chain woes and doubts over international expansion, the firm says, but “we believe Roku’s leadership position in the installed base fuels its real business – advertising.” It’s expecting Q4 player sales to drop 25% but Platform to grow 60%. And while valuation had gotten high, The Trade Desk (TTD) looks “more approachable” now, and it expects 22% revenue growth and more positive commentary into 2022, led by connected TV.
Digital Turbine (APPS) initially sold off somewhat sharply in Tuesday postmarket action after its earnings beat, where net income more than doubled and pro forma revenues grew 38%.

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