Why PubMatic Stock Gained 40% in the First Half of the Year | The Motley Fool

What happened

After going public late last year, ad tech firm PubMatic (NASDAQ:PUBM) delivered a strong performance through the first half of 2021. As of June 30, the stock was up 40%.

The supply side platform showed off strong growth in its two earnings reports and rode the surge in growth stocks early in the year, which peaked in February. At one point, the stock was up 150% for the year in just two months. Though the slide since then may be disappointing to investors, a 40% gain in six months is nothing to complain about.

Image source: Getty Images.

You can see the stock’s volatility in the chart below.

PUBM Chart

PUBM data by YCharts

So what

Ad tech stocks have largely thrived during the pandemic as attention has shifted to digital channels, and PubMatic, which helps publishers optimize their digital ad inventory, has been no exception. 

PubMatic rallied early in the year alongside growth stocks, and Wall Street largely came out in favor of the recent IPO in the beginning of January. In its fourth-quarter earnings report in late February, PubMatic delivered smashing results, posting 64% revenue growth to $56.2 million, ahead of estimates at $47.5 million. On the bottom line, adjusted EBITDA nearly tripled, and adjusted earnings per share jumped from $0.06 in the quarter a year ago to $0.34, which topped expectations at $0.30. Management credited the digital transformation, and the company’s own differentiated platform and execution for the strong performance. The stock rose 31% the day the report came out, though it plunged just a few days later on news that Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Google was removing third-party cookies from its Chrome web browser, which was seen as a threat to ad tech companies.

The company delivered another strong round of results in May with revenue up 54% in the first quarter to $43.6 million, and adjusted earnings per share increased from breakeven to $0.09, which matched estimates. 

Towards the end of June, PubMatic shares popped as Google announced a delay in its cookie ban.

Now what

PubMatic’s growth seems likely to cool off as it will face difficult comparisons later in the year, but there’s a lot to like about this fast-growing supply side platform, including its rapid growth, the emerging opportunity in areas like connected TV, and its wide EBITDA margins, which are on track to hit 27% to 29% this year. 

After a strong start as a publicly traded company, PubMatic looks poised to continue outperforming.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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