Is PubMatic stock worth buying now?

In 2024, digital advertising is expected to grow by 131 TP3T from last year, accounting for nearly 701 TP3T of global ad spending. this will have a significant impact on ad tech companies.PubMatic (NASDAQ resonance code: PUBM)This is good news.

In fact, strong growth in advertising is already helping the company, with PubMatic posting a stellar fourth quarter and its shares hitting a 52-week high of $24.19 on April 4th.

The price has since come down, so is it time to buy PubMatic shares? To answer this question, let's first look at the company to see if it makes sense as a long-term investment.

PubMatic's differentiated products

PubMatic's business model allows it to capitalize on the growth opportunities in the digital advertising market. The company operates a software platform for website and mobile app owners (collectively known as publishers) to generate revenue by displaying ads on their digital assets. This is what the advertising industry calls a supply-side platform (SSP).

PubMatic has wisely expanded its capabilities beyond the SSP service, adding revenue-enhancing features to meet the changing needs of its customers. PubMatic now offers a range of other solutions to increase its value to publishers and expand its services to advertisers.

For example, to capitalize on the opportunity for consumers to turn to streaming media, PubMatic introduced a new feature called "Activate" last year. The service streamlines the process of buying CTVs and other digital infomercials between publishers and advertisers. In the fourth quarter, Activate adoption grew by 25% over the previous quarter.

PubMatic also solved a key problem in the advertising industry: this year, theAlphabet flagThird-party cookie tracking has been eliminated from Chrome under the Chrome browser. These cookies were used to advertise to consumers based on their online activity.

With a market share of 64% among web browsers, Chrome is the world's leading browser, so removing third-party cookies is significant. Many in the advertising industry have dubbed this change "Chrome-ageddon," which is a sign of its importance.

PubMatic has created a proprietary alternative to third-party cookies called Connect, which allows customers to shift their ad targeting needs to PubMatic to avoid the hassle of Chrome changes. Connect's adoption rate jumped 20% in Q4 over Q3, so customers can shift their ad targeting needs to PubMatic and avoid the hassle of Chrome changes.

Financial Success of PubMatic

PubMatic's proprietary software boosted its fourth-quarter revenue by 141 TP3T over 2022 to $84.6 million. But this was only the beginning of a successful quarter. For example, the company's fourth quarter net income was $18.7 million, up from $12.8 million in 2022.

In 2023, PubMatic's free cash flow (FCF) also reached a record $52.8 million, an increase of $38% from 2022. Free cash flow allows the company to fund investments in the business, pay down debt, and repurchase stock. As a result, PubMatic purchased 4 million shares of stock last year.

In 2023, the Company's balance sheet is healthy. The total assets amounted to USD 695.2 million, of which USD 175.3 million was cash, cash equivalents and marketable securities. The total amount of liabilities is US$399.0 million and there is no debt.

Decision to Purchase PubMatic Shares

PubMatic is poised for more growth. The company expects first quarter revenue to be at least $61 million, a double-digit increase over 2023's $55.4 million. For the full year, PubMatic expects 2024 revenues to grow by at least 10% over 2023.

The advertising industry's strong growth in digital ad spending in 2024 is expected to continue through 2025. This will be a multi-year tailwind for PubMatic's revenue growth.

Moreover, PubMatic stock has a consensus hold rating from Wall Street analysts. Moreover, these analysts have predicted a median stock price of $25.50, indicating that PubMatic has some upside.

There are a number of factors working in the company's favor, and PubMatic's revenue growth suggests that it has managed to gain a foothold in the ongoing expansion of the digital advertising industry.

In addition, the company has a healthy financial position and compelling digital advertising products. These factors combine to make PubMatic a worthwhile long-term investment.

Should you invest $1,000 in PubMatic now?

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Alphabet executive Suzanne Frey is a member of The Motley Fool's board of directors.Robert Izquierdo owns shares of Alphabet and PubMatic.The Motley Fool holds shares of Alphabet and PubMatic.The Motley Fool recommends Alphabet and PubMatic.The Motley Fool has a disclosure policy. The Motley Fool has a disclosure policy.

Is PubMatic Stock a Buy Now? This post was originally published by The Motley Fool.