Bank of America: Google’s antitrust ruling delivers a “big gift,” raises ad platform Magnite (MGNI.US) target price to $38

Zhitong Finance APP has learned that the remedies proposed by the U.S. Department of Justice in an ad tech antitrust case will have a profound impact on Magnite's (MGNI.US) growth prospects. This has prompted Bank of America Securities analyst Omar Dessouky to raise the target price of this advertising platform by more than 50% to $38. Even though the stock rose nearly 10% on Tuesday, this target price still implies a 48% upside potential.

The Department of Justice's decision found that the win rates for Magnite and its peers in advertising have long been suppressed by monopolistic mechanisms. The core reason is that Google (GOOGL.US) Ad Exchange (AdX) has an almost exclusive grasp of the largest source of ad demand, while also owning the pricing and audience data that support its bidding algorithm. Based on this, Dessouky judges that in a fair auction environment, Google's AdX win rate could drop to as low as 30%.

Dessouky expects that, according to the behavioral remedies adopted in the memo unsealed by the U.S. Department of Justice, ad spend monopolized by Google's AdX exchange will flow to competitors including Magnite.

Dessouky stated: "We estimate that Magnite's share of open web display ad spend will rise from 6% to 8%-10%, driving the DV+ business into a growth channel; whereas previous outlooks were for low or even zero growth."

Therefore, the analyst raised Magnite's 2028 EBITDA forecast by 28%, and believes that if Magnite achieves a truly fair bidding environment in Google's ad traffic pool and its win rate in existing ad inventory continues to improve, this profitability metric still has room for further upward adjustment.

He wrote: "Overall, we believe that in the coming years, Google AdX could give up as much as nearly half of its 60% market share to the four major competitors."