Why Magnite Stock Was Falling Today

Shares of Magnite (NASDAQ: MGNI), the sell-side adtech platform, were pulling back on reports that Walt Disney could stop using Magnite for its Disney Real-Time Ad Exchange, or DRAX, with some demand-side platforms (DSPs).

As a result, the stock closed down 10.8% on the news.

Image source: Getty Images.

Is Magnite in trouble?

At the Digiday Publishing Summit, Jamie Power, Disney's senior vice president of addressable sales, said in a presentation that Disney is no longer using Magnite with two demand-side platforms, Alphabet and The Trade Desk.

The news seemed to indicate a setback for Magnite, as being dropped by Disney in those relationships is clearly a loss of business.

However, several Wall Street analysts pushed back against the market's response, saying it was old news and that the sell-off created a buying opportunity.

Benchmark, for example, said that the story originally arose back in March, essentially saying it was already priced in. Analyst Daniel Kurnos also argued that it was "highly unlikely" that Disney would build a full end-to-end stack without Magnite.

Craig-Hallum and Needham also said that the sell-off creates a buying opportunity for Magnite.

What it means for Magnite

An 11% decline might seem excessive, considering the news seems partly speculative at this point, and the implications aren't fully understood.

Like other adtech stocks, Magnite has struggled in the aftermath of the pandemic, as the earlier boom in digital advertising has given way to slower growth and less enthusiasm among investors.

Magnite is still struggling to accelerate its growth, as revenue was up just 7% in the second quarter. With or without the Disney setback, the company will have to improve on that number in order for the stock to be a winner.

Should you invest $1,000 in Magnite right now?

Before you buy stock in Magnite, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Magnite wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $744,197!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of September 30, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Magnite, The Trade Desk, and Walt Disney. The Motley Fool has positions in and recommends Alphabet, The Trade Desk, and Walt Disney. The Motley Fool recommends Magnite. The Motley Fool has a disclosure policy.