With the rest of the market missing expectations and giving poor guidance, Ad Tech (businesses) have so far been pretty stable.

Granted, stock prices have dipped with the rest of the market, but the businesses are still performing.

$MGNI reported EPS in line at $0.08, a 166% increase YoY; with sales coming in at $118M, beating the estimate of $107M by 10%, +95% YoY.

$TTD EPS of $0.21 beat the $0.15 estimate by 40%, a +50% YoY gain. Sales came in at $315M, beating the estimated $304M by 3%, a +43% YoY gain.

$PUBM, I don't own anymore, beat EPS estimate by nearly 200% coming in at $0.14. Sales and Q2 guide were in-line with estimates as well.

$CTV just missed the EPS estimate of ($0.05), coming in at ($0.06), however sales beat by 21%, coming in at $25.9M. They reported organic YoY revenue growth of 30%, and +40% revenue growth including their new acquisition of TV Squared. Losses are expected to narrow next Q, and FY'22 revenue is expected between $135-$140M.

$ZMDTF had a +183% YoY Q with revenue of $18.7M and FY'21 revenue of $52.6M, +107% YoY. They also finished the year with a positive EBITDA of $5.8M for FY'21. The company is guiding for a FY'22 revenue of $74M-$80M, approximately +50% YoY.

We're still waiting on reports dates from $APPS $MOBQ $MVVYF.

$KBNT is on the bubble from last Q., they report on May 16.

And the one I'm most anxious/excited about, AcuityAds $ATY, reports on May 12th. They also just got approval for a stock buyback plan. I'll be watching this one closely.

I'd like to consolidate some of these Ad Tech positions after earnings season is over, but so far I've been mostly pleased with the sectors results.

How are you guy's feeling about the Ad Tech sector over the next few Q's? 👇

🦜

An investors advantage in the market is recognizing a trend before the general market and trading algorithms price in the upside.

I’m a huge Ad Tech bull, not a surprise if you follow me on social media or subscribe to my newsletter, but I think the market is missing something in Ad Tech, and it’s worth exploring further.

From “barkers” standing on a street corner, to print ads (signs & newspapers), radio ads, TV ads, banner ads, pop up ads, video ads, to CTV; we’ve come a long way in advertising.

There was a paradigm shift with each new form of media (print, radio, TV, Internet, and now connected television “CTV”).

Although we still see remnants of all the other forms of advertising previously employed, each new form of media has slowly taken share from the previous. Along with that media change there’s been a shift in the supply chain of advertising as well.

Advertising grew from a very local and personal experience into art departments, multi-national ad agencies, publishers, buy & sell side platforms, online market places, and much more.

To get an idea of all the different players in the industry, check out this edition of stock Squawk: “The World of Ad Tech”

For a closer look at how CTV developed; Here’s an excerpt from Conviva with an excellent history summary.

You can find the full article “here”:

Here’s where it get’s interesting. (stay with me here, I promise it relates)

The car was invented in 1886. Ford built a prototype in 1896 (10yrs later), and his first assembly plant in 1903 (another 7yrs). In 1907 there were 140k cars in use, by 1910 cars overtook the horse for passenger travel, and by 1917 there were over 5 million cars in use; 35x just 10 years earlier. It was a slow ramp (21yrs) from invention to acceptance/adoption; but once it took hold there was no turning back.

The iPhone was introduced in 2007. In 5 years, the smartphone went from 3% of the market to over 50%.

Smart TV’s started being manufactured in 2015. In 4 years, connected TV penetrated roughly 80% of US households; and since then we had a little thing called Covid happen.

The point is, the adoption of new technology is happening at a record pace in normal circumstances, but when the stars align that adoption can be parabolic.

A larger and larger share of content is going to continue to move to connected TV. Viewers are going to continue to find more of their desired programming on connected TV where they can watch what they want, when they want. Advertisers are going to continue to follow viewers.

So why has the market spent most of 2021 selling off Ad Tech?

The invention of connected TV created a new advertising platform. A year+ of lockdowns has pulled forward what was already an accelerated adoption rate. The speed of that adoption has create both problems and opportunities.

I believe the market is underestimating both the growth rate, and the speed of innovation happening in Ad Tech.

Most of the problems faced by Ad Tech companies revolve around the visibility into who ads are being delivered to, and their conversion rates.

The walled garden’s of Google & Apple are putting pressure on the industry by eliminating cookies and restricting the sharing of 3rd party data.

These aren’t surprises, and the industry has been working on them for years. Some companies are creating their own alternatives, such as The Trade Desks UID2.0, some are creating their own platforms to track and optimize campaigns for maximum cost/conversion such as AcuityAds & Zoomd, and others are creating their own 1st party data such as Roku & Innovid.

To the point, the old way of doing things is not going to work in the future. The Neilson data that the TV advertising world has depended on for decades is practically worthless for CTV (and was questionable for analog TV). There will be unique solutions that find their place in the market and provide unique investing opportunities.

On growth, no one could have predicted the Covid Pandemic and the subsequent lockdowns followed by the exponential adoption rate of CTV. Even still, the market continues to under-estimate the growth of ad spend generally, and digital ad spend specifically.

Paraphrased from a Wall Street Journal article last week, you can find the article here: “Advertising Market Keeps Growing Faster Than Expected” (Data from GroupM of ad giant WPP PLC quoted in the article)

Advertising growth is happening faster than even those closest to the data have predicted. They’ve significantly raised forecast twice in the last 12 months, nearly doubling their prediction, all despite the supply chain headwinds we experienced throughout 2021. Could they be under-estimating 2022 growth as well?

I think Ad Tech is getting lumped in with the rest of unprofitable small/mid cap growth stocks being sold off. If the space was overvalued in Feb'21 (it was), it is undervalued now.

COVID may not go away, but the over reaction (public & market) will come to an end. Supply chain’s will un-bottleneck. Companies will be trying to get their products in front of customers.

Businesses will also be looking for the best returns on their investments (ROI). They will want assurance that their ads are getting in front of their target audience, and those ads convert to increased revenue. That’s going to require access to new media and new technology to track results.

That’s what the market is missing. It’s not missing that their will be ad spend, or even the increase in ad spend, in so much as it is missing:

The walled gardens are still going to be major players (and recipients) of ad dollars. But new media & new technology has opened up a world of opportunity for new players in the game.

I’m going to skip the obvious here. You guy’s already know plenty about Google, Apple, The Trade Desk, etc. They have all held up pretty well the past year. Let’s look at some others:

ROKU ($ROKU): After forming a double top near $500/share earlier this year, Roku has traded all the way back down to $200. Interestingly, it’s lost over 50% of it’s value 4 times since it’s IPO in 2018. The short term headwind of potentially losing YouTube on their platform has now been resolved with a multiyear agreement with Google. Additionally, Best Buy has pulled TCL Google TV’s due to slow & buggy software. This is more confirmation that Roku has a superior product. For investors, we should be watching ARPU (Average Revenue Per User) for signs of continued growth.

Magnite ($MGNI): The largest independent SSP (sell-side platform), largely growing in-organically through acquisitions. This is not to say they aren’t growing organically as well. The market has been penalizing in-organic growth the back half of 2021, but all the acquisitions has put Magnite in a position to capitalize on being a one-stop shop for publishers. Their focus on CTV (the fastest growing sector of advertising) should also boost their revenue growth in 2022. (They seem to think they are undervalued as well, they just announced a $50M stock buy back on 12/13/21)

Pubmatic ($PUBM): Nearly as big as Magnite, and growing largely through organic growth, they are becoming a significant challenger in the space. They are not as concentrated in CTV as Magnite, and I’ll be watching for signs of growth slowdown as more ad dollars shift in that direction. That said, their management team has been excellent, and I look for them to continue to outperform in 2022.

Digital Turbine ($APPS): Digital Turbine is in a unique space with virtually no competition in an extremely tuff barrier to entry market. Think the Apple Apps store, you know Apple’s cash cow, but for Android. I don’t think the general market truly understands what they do, and thus has resulted in some large swings in price.

AcuityAds ($ATY): You can find my recent deep dive into AcuityAds “Here”. They are a high growth company trading like a mature value play. 2022 will be an opportunity to prove who they are. Where they are trading today, there is huge upside with minimal risk. Recommend you check out the deep dive linked above.

Innovid ($CTV): Innovid is on the infrastructure side of ad tech, focused on ad delivery. Since they are not in direct competition with any of the other players in the space, they are in a unique position to collect data from all sides. Remember I mentioned before that one of the biggest issues with the new CTV media was there was not a good way to get insight on ad targeting and conversion? Well this is the company who could solve that issue with their access to first party data. They have the potential to be the Neilson ratings of the 21st century. You can check out my initial summary of the company “Here”.

Kubient ($KBNT): Kubient’s primary appeal for me is their ad fraud software “KAI”. They’ve gotten great early results, with beta users extending partnerships and spend. They’ve recently solved one of their biggest problems (recruiting qualified employee’s) by acquiring MediaCrossing. Adding built in revenue, cross selling potential, and as importantly experienced personnel. The’re trading at a $34M cap and have $27M in cash. The acquisition only cost them 500k and a promise of about 5% in stock IF they hit milestones in ‘22. There basically trading for cash on hand and just got a big rev bump, cross selling opportunity, & skilled employees. I like it.

There are other (smaller) players in my portfolio as well, such as ZOOMD ($ZMDTF) and Moovly Media ($MVVYF), both definitely worth taking a look at. Either one could be a long term winner with patience and a long term view. (I recently added to $ZMDTF and plan to add more to $MVVYF soon)

We’re going to see the narrative shift day to day over the next few months depending on how the market is acting. It’s important for long term investors to look into the future and see where the market is going, develop your thesis, and have patience for it to come to fruition.

You can find the full newsletter article, and sign-up to get a copy sent straight to your inbox here: "Stock Squawk"

Look forward to hearing your opinions in the comments 🙏👇

🦜

A lot of short sighted selling in Ad Tech led me to take another hard look at the industry as a whole and my positions specifically. I don’t do a lot of deep dives, but I think a rundown of the industry, and a deeper look into a position I’ve had a lot of conviction in, will be helpful for me, and therefore for you (I hope).

Let’s start with the industry…

As you know, I’m a big fan of Ad Tech in general. If you’re still getting familiar with the space, you can get a complete breakdown in this issue of “Stock Squawk: The World of Ad Tech”.

Between IDFA with Apple’s iOS, Google’s elimination of cookies (postponed to 2023), supply chain issues, and labor shortages among other headwinds, Ad Tech has seen it’s fair share of pressure since the February ‘21 highs.

None of these issues are surprises, and frankly I felt like the risks were mostly priced in going into 3Q21 earnings, but that seems to not be the case so far, as companies are repeatedly getting sold off on decent, if average, earnings reports. They have all listed the same issues I’ve mentioned above to different degree’s.

Pragmatic advertising and CTV advertising continues to grow across the board & take market share from legacy systems. This trend is going to continue. Each company I follow has it’s own unique macro issues, but a year from now, two years from now, they’re all going to see much higher revenue’s from today. I still see the space as an opportunity for investment.

I could talk about any number of my Ad Tech holdings and have a similar discussion. Roku, Magnite, Digital Turbine all do different things in the same Ad Tech space, but their story in a broader scope is similar. I’ve chosen to break down Acuity for two reasons. First, I rode it from $6 to $25, and back down to under $5; and I want to find out if I’ve missed something, did I make a mistake? Secondly, this has been a long term conviction position; so I hope to remove some mental bias by forcing myself to put it in print.

*A note of caution: AcuityAds is a Micro-cap and carries the inherent volatility risk of all micro-caps.

Acuity is a DSP (like The Trade Desk), a 3rd party software that is used by advertisers to buy mobile, search, and video ads from a marketplace on which publishers list advertising inventory. A DSP allows for the management of advertising across many real-time bidding networks, as opposed to just one (like Google Ads).

Traditional DSPs predominately work with ad agencies and large companies with big ad departments, however Acuity is focused on it’s self-service platform Illumin. This could potentially allow advertisers to cut out the ad agency middleman, and their 30%-50% cut of ad fee’s.

In addition, the Illumin platform has the potential to give small local business’s the opportunity to efficiently and affordably advertise in their local area (something that is not commercially available to them currently).

Acuity is going all in on Illumin. On their latest earnings report, CEO Tal Hayek stated that they plan to move all clients off their legacy system, and onto Illumin, buy the end of 2022.

So what makes Illumin special?

Key numbers: 3Q21

Revenue: $27.5 million (+5.4% YoY, +11% constant currency basis)

Adjusted EBITDA: $4.4 million (+9.5% YoY)

Illumin Revenue: $7.4 million (+42%; new Tier 1 clients grew 53%, Illumin accounted for 27% of total revenue)

CTV: +220% YoY; no dollars given, but Tal hinted at just under 10% of revenue; so I’m hypothesizing roughly $2 million from a $600k base

Gross Margin: 51.9%, in line with 3Q20

Net revenue (less media costs): $14.3 million (+5.4% YoY)

Net income: $3.4 million (+265% YoY)

Operating cash flow: $9.5 million (+41.8% YoY)

Cash Balance: $100 million

Revenue increase attributed to strong sequential revenue growth from Illumin, which more than offset lower advertising spend partly related to supply chain disruptions from some of their legacy customers. Revenue growth was also aided by newer emerging verticals such as pharmaceutical, technology, automotive and direct-to-consumer brands.

What’s driving the Illumin growth today? Let’s hear strait from Tal:

That’s 5 clients increasing spend from $368k to $1.36M in two quarters, a 370% increase.

As I’m writing this, $ATY shares are down from a high of $26/share, to $4.35/share. Roughly $270 million current market cap, with an estimated 2021 revenue of $115 million and $100 million in cash.

Minus cash; Acuity is trading at 1.47 P/S

For reference: Magnite P/S is 10; The Trade Desk P/S is 32 (40 after Monday’s pop)

The two main risks here are:

Other concerns:

Tal stressed multiple times on the conference call that they plan to push for “Mega Growth” in 2022, even if it’s at the expense of EBITDA. They believe they have a product that is a differentiator in the market with Illumin, they have some use cases under their belt, clients already on the service are increasing spend, and advertisers are expected to resolve their supply chain issues next year.

Acuity is ready to push full steam ahead. They anticipate converting multiple Tier 1 ($10+ million) clients, integrating all legacy clients onto Illumin, and finding the right strategic acquisitions to enhance their self service capabilities. On the creative side, Moovly Media $MVVYF, with a market cap around $21 million, could be an interesting acquisition (I’m also a shareholder of Moovly).

Now, can they execute?

My Projections: I’m looking at a 2yr business case…

Let’s start with the base case for 2022. Remember Acuity’s market cap, minus cash, is sitting at $170 million.

Let’s start with all legacy clients being moved onto the Illumin platform with current spend. That’s approximately a $115 million base revenue case. Illumin grew 42% in Q3; if we extrapolate over the entire 2022 based case, we can add another $48 million, or $163 million in total revenue. With a mix of 3 or 4 Tier 1 clients and moderate spending increases from current clients as macro conditions improve, this seems like a more than reasonable expectation, with ample room for a beat. Another 42% in 2023 would add an additional $68 million, or $231 million in total revenue. I think both these numbers are reasonable and conservative.

Worst case:

They spend the $100 million in cash to achieve the above growth numbers and they continue trading like a value stock at 1.5x P/S due to questions of growth sustainability. Based on 2023 revenue of $231 million, they would have a market cap of approximately $346 million. That’s a 28% increase from today’s prices, roughly $5.50/share, a disappointment for a growth stock, but a average 2 year return for most investors.

Best (reasonable) case:

Let’s suppose they make 2 strategic acquisitions for $50 million total and keep $50 million cash on the books. Those acquisitions fuel Illumin growth to not only land the top Tier one clients, but also lay a path to start seeing true small advertiser self serve come to fruition. We’re still in the early stages, but the path is clear. We only see modest improvement from the base case of $231 million, to say $250 million in 2023. But they’ve proven sustainable 40%+ growth with a path to a huge untapped TAM. Their P/S rerates in line with Magnite at 10, and their market cap is now $2.5 billion. That’s a 925% increase from todays price, roughly $40/share.

Can they do worse than the base case, yes. If they completely fail at execution, it’s possible.

Can they beat the best case, yes. If they just land the 8 Tier 1 auto manufacturers in their pipeline ($80M rev), & get a similar +300% increase in existing customer spend that they’ve already seen, they could blow away the best case scenario.

Realistically, I expect to fall somewhere between the two.

First I want to thank Justin B. @justinb90072145 for engaging on Twitter & in DMs to help flesh out my take here. Some of these takes are pulled from our conversation. Healthy debate and discussion truly is a powerful tool that more people should take advantage of. I digress…

Tal is a little unrefined, and the interim CFO is an unknown, BUT… Acuity was left for dead during the 2020 pandemic. Go back and look at revenue and sales, they traded down to $0.52/share, they could have easily folded up shop. But they rallied the troops, scrambled to get new clients, maintained margin, and survived. And it truly was impressive. I love this thought from Justin, “Tal doesn’t like getting punched in the mouth about his company…and that just happened.” I predict they come out swinging in 2022.

There is no dispute that their balance sheet is solid. And as Justin pointed out to me, they have the scars and experience of 2020 behind them. Love this quote from Justin, “..there are "spec” tech companies trading way higher on hopes & dreams vs. revenue and margins. I’ll take revenue and margins..“

I recently re-watched this video of Lynch after @gannonbreslin linked it in his last newsletter, and I highly recommend taking 45 minutes to give the full speech a listen:

One piece of this speech really hit home when thinking about Aquity (between 13 minute - 16 minute mark). He tells a great story, but paraphrased: "A company with no debt has a hard time going bankrupt”.

Aquity is cash flow positive with $100 million in the bank, they are in no immediate danger of going bankrupt, thus the downside here is limited in my opinion.

I fully expect the 4th Q to be under whelming. But I’ll be looking for signs that the thesis is playing out. Did they do any M&A? Did they land any Tier 1 clients? Has Illumin growth continued at a 40%+ growth rate? Is Total revenue growing, or staying flat while Illumin continues to grow? Are current clients continuing to increase spend? Did that mystery Shopify deal come to fruition?

At this point, I don’t need them to knock it out of the park in 4Q21, I need to see definitive progress towards my 2022 outlook. I think 2022 will be the make or break turning point for Aquity, and their Illumin platform.

I’m going to give them room to operate and keep accumulating when I feel the opportunity is right. My 2023 price range is anywhere from $5.50 to $40.00; one would be a massive disappointment, but not a portfolio killer; the other could be life changing. Market conditions, execution, and time will ultimately decide.

Without disclosing the service, a popular analyst just reiterated them as a buy and sent out this quote to their members: “…will certainly not be selling any time soon and will need a few more quarters of management credibility hits before we’d consider doing so; in truth, we’re probably closer to buying more than calling for a sell.”

I think Aquity, and Ad Tech in general, probably has another quarter to prove they can get going in the right direction. I honestly don’t expect a big 4Q21, and will look to play options on swings and accumulate shares where I see opportunity across my Ad Tech positions.

This is not a pump of Acuity by any means. You have to believe in the vision and be willing to hold for at least a couple of years. That’s where I currently am. I added to my position last week on the initial drop after earnings, and added pre-market again today. $ATY is currently a 1.5% position. I will be monitoring closely for any signs of a broken thesis, if I cant find one, I will continue to add.

You can find the full article Here: Stock Squawk "AcuityAds"

I look forward to hearing your take on Acuity. Am I missing anything?

🦜

(I'll link todays trade when it posts)

You guy’s know I love Ad Tech. And you guy’s know I like the occasional speculative investment. So this week I wanted to run down a few of my Micro-Caps, but ended up writing about all my Ad Tech positions. These are all either in the port, were in the port, or on the watchlist to add to the port.

Micro’s are not for the faint of heart. Details are scarce, information is slow to get out, and volatility is high. So remember to size your positions according to your risk tolerance.

And if you’re still trying to figure out the difference between a SSP/DSP, never fear, remember to check out “The World of Ad Tech” to get the full breakdown on the industry.

Without further delay, let’s dive in. 👇

Market Cap: $19M

Share Price: $0.12

Earnings: ‘21 projection of $1.55M, up about 10% YoY; operating expense $4.4M, up about 50% YoY

What they do: Moovly provides cloud-based creative tools for users to create compelling marketing, communication, and training videos & presentations. Clients include over 300 of the Fortune 500, along with many other small businesses, freelancers, and Ivy league universities. They also recently announced they were launching podcasts as well!

My interest: I started this position a little early and have averaged down a couple of times. I’m impressed by their website & social media compared to many peers. Positive news and partnerships continue to be announced on almost a weekly basis. They have had a couple of quarters with Revenue above operating expenses, but they need to show consistent signs of becoming profitable (or at least breaking even). I love the company, if they can increase revenue and cut costs, I believe this name can have a nice run. Would likely start trimming shares over $0.50.

Current Position: 50,000 shares @ .20 basis; Approx. 0.5% position

Market Cap: $31M

Share Price: $0.33

Earnings: 2Q2021 Rev $11.1M +97% YoY and a record for the company. Record adjusted EBITDA of $1.3M. Maintaining +30%-40% full year rev growth. $2M cash on hand and $0 debt.

What they do: ZOOMD offers a site search engine to publishers and a mobile app user acquisition platform to advertisers. In January 2021, they launched a self service SaaS platform to save it’s customers time, resources, and money in the ad buying and optimization process.

My interest: I bought my full position over 2 days in Jan ‘21. This is a moon or bust position for me that I have no plans to average up on. Would consider trimming around $1 depending on market conditions at the time.

Current Position: 20,000 shares @ .23 basis; Approx. 0.6% position

Market Cap: $49M

Share Price: $3.50

Earnings: 2Q2021 Rev $500k, 440% YoY increase for the same period. Quarterly loss of (0.12) per share, YoY increase of 71% from a loss of (0.42) for the same period. Cash balance of $30.5M.

What they do: Kubient operates “Audience Cloud”, a flexible open marketplace for advertisers & publishers. Their Ad Fraud software “KAI” has been reported to have significant success with a pipeline of interested customers. Rollouts to new customers has been slow, and primarily delayed by the inability to hire enough qualified personnel.

My interest: I’ve been in & out of this company a few times, but I’m planning to stay as long as they continue to get a positive response to KAI. It’s a definite market need, and early success could compound quickly. They are also a potential buy-out target. Currently trading near 1.5x cash on hand, I’m willing to give them a little time to increase hiring and decrease roll out time to new customers.

Current Position: 2,000 shares @ $4.82 basis; Approx. 0.6% position

Market Cap: $456M

Share Price: $7.50

Earnings: 2Q2021 Revenue $30.3M (+55%) & $5.4M (+154%) in adjusted EBITDA. Positive net income of $3.4M and $93.4M cash on hand.

What they do: Acuity is disrupting the traditional Ad Tech model with their platform Illumin. Illumin offers planning, buying, & omnichannel intelligence in a single platform. It is a radically easier and more effective interface for placing online ads. Advertisers can map their own journey without an agency. This could open up a huge market for small mom & pop companies to utilize digital advertising on a limited budget. You can check out a short thread I wrote on Acuity back in April ‘21 HERE!

My interest: This is all about the story. They are trying to bring the little guy to programmatic advertising through their software Illumin. As long as that story stays intact, I will remain an investor. I had a position at $6, and doubled it when they dipped from $26 to $12. No plans to add or trim.

Current Position: 2,000 shares @ $8.00 basis; Approx. 1.5% position

Market Cap: $1.3B (implied valuation)

Share Price: $10.00 (SPAC)

Earnings: ‘21 Revenue $68.8M +21% YoY; Gross Profit $56.1M +81% margin; Adjusted EBITDA $2.6M

What they do: Innovid is a independent ad delivery and measurement platform for connected TV. Uniquely from their competitors, they consider themselves an infrastructure software platform that works with (not against) DSP, SSP, Publisher, etc. You can read more on this CommonStock Memo HERE!

My interest: SPACs have been out of favor, and there is no telling how the market will react when they de-SPAC (planned for 4th Q 2021). I started a position in June, that I sold at the beginning of September to free up some trading capital (it hasn’t moved in months). I plan to restart the position by the end of the month.

C**urrent Position are you** you: Plan to buy a starter position (1000 shares) by the end of September. Will likely add on any de-SPAC weakness.

Market Cap: $1.44B

Share Price: $28.00

Earnings: FY21 Expected Rev $207M, EBITDA $68M, Margin 33%. $122M Cash, no debt.

What they do: PubMatic is an SSP, providing publisher inventory to agencies and advertisers.

My interest: The Ad Tech space is young with a ton of innovation and growing TAM. I think PubMatic is slightly undervalued compared to it’s peers, which provides an additional investment opportunity in the space. This position is more of a highbred Swing for me, meaning I may sell on a stock rebound, but open to holding if it looks like they start gaining market share relative to other holdings.

Current Position: 750 shares @ $30 basis; Approx. 2% position

Market Cap: $1.5B

Share Price: $19.00

Earnings: FY21 Expected Rev $303M, EBITDA $117M, Margin 38%

What they do: Tremor plays both sides of the SSP/DSP game.

My interest: History suggests that companies who focus on one side or the other have more success, but earnings and valuations are getting interesting compared to their peers. It’s on the short list to add to the portfolio.

Current Position: None currently, but have a starter limit order in at $18.00/share

Market Cap: $3.88B

Share Price: $29.00

Earnings: FY21 Expected Rev $416M, EBITDA $131M, Margin 31%

What they do: Magnite is the world’s largest independent sell-side advertising platform. They continue to make strategic acquisitions, such as SpotX, to further their industry dominance, specifically to better serve the fast-growing CTV market.

My interest: My 2nd Ad Tech purchase ever. After buying the largest DSP ($TTD) in June 2020, I found the largest SSP player (Magnite) in August, and averaged up in September. They continue to lead the space with their focus on on where advertising is going (CTV). I’m a little price anchored with this position, so have been adding some option plays on these dips below $30. No plan to trim or sell. You can find my write-up from June HERE.

Current Position: 1500 shares @ $6.77 basis; Approx. 5% position

Market Cap: $6B

Share Price: $63.00

Earnings: 1Q2021 Rev $212M vs $190M estimate; guidance for 2Q2021 Rev $300M-$306M vs $291M Est.

What they do: Digital Turbine works in the Ad Tech space, but in a very unique manner. Through their software platform Ignite, they help advertisers, mobile operators, and original equipment manufacturers (OEMs) all at the same time. Pre-installed on over 700 million Android devices, Ignite is used to pre-load & load mobile applications among other verticals (very rudimentary summary). IQ (aka: @investmentquotes) has an excellent deep dive on $APPS… HERE!

My interest: It took me a while to understand what these guy’s actually did, and I still think they are misunderstood by the market. They are the ONLY player in their space. Maybe not the exact comparison, but I think of them like the Apple App Store for Android.

Current Position: 300 shares @ $64.57 basis; Approx. 2% position

Market Cap: $35B

Share Price: $73.00

Earnings: 2Q2021 Rev doubled to $280M from $139.4M a year ago. 3Q guidance was raised to $282M from $275M consensus estimates.

What they do: The largest DSP on the market, they service ad agencies & advertisers. A reminder, you can check out “The World of Ad Tech” Newsletter for details on how all the players interact with each other.

My interest: My first exposure to Ad Tech was seeing $TTD mentioned all over FinTwit. After taking a small position in June of 2020, I finally averaged up on the May ‘21 dip. They are the biggest player in the space, and winners continue to win. No plan’s to trim or sell.

Current Position: 350 shares @ $45.13 basis; Approx. 2.5% position

I discovered the whole world of Ad Tech thanks to my fellow FinTwitters. It is my 2nd largest investment sector behind E-commerce, representing 18% of the portfolio.

I was lucky to discover the sector as it was coming out of the Covid lows, and although it’s had some downward pressure on it the last few months, we are still in the early stages of opportunity.

I’ve listed the pure plays here, but there are many more companies in the industry. I also own $ROKU $FB $EGLX $AAPL $AMZN and more… that all have a piece of the advertising space.

I hope this weeks Memo introduces you to a few names you may not know. Remember to do your own due diligence, and size your positions according to your risk appetite.

You can check out the full Newsletter here: Stock Squawk Newsletter!

What are your favorites?

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