Adtech company PubMatic (PUBM) recently announced a multi-year integration of technology from Nvidia (PUBM) to leverage accelerated computing. This overhaul of the infrastructure enables the company to deliver artificial intelligence (AI) processing five times faster than traditional systems.
Investors welcomed this news, as PUBM stock rose 7.5% intraday on Oct. 8. Should you buy PUBM stock at this current juncture?
PubMatic is a technology company based in Redwood City, California, that helps digital publishers and advertisers manage and grow their advertising businesses. Founded in 2006, it offers a cloud-based platform that connects publishers with advertisers through automated systems. PubMatic uses advanced technology, including machine learning, to optimize ad placements and increase revenue for its clients.
The company processes billions of ad impressions daily and supports various digital channels like desktop, mobile, video, and connected TV. Its flexible and scalable platform gives customers control over their ad inventory, making the digital advertising process more efficient and transparent. PubMatic’s continuous innovation and global presence set it apart in the digital advertising space. The company currently has a market capitalization of $363.5 million.
Due to revenue challenges, cautious future guidance, and volatility in the advertising space, PUBM stock has been on the decline. Over the past 52 weeks, the stock has dropped 45%, while it is down 43% year-to-date (YTD). PUBM stock had reached a 52-week low of $7.01 in August, but shares are up 19% from that level. Over the past five days, the stock is also up 1.5%.
As of this writing, PubMatic has a price-to-sales ratio of 1.25 times, which is slightly lower than the industry average.
On Aug. 11, PubMatic reported its second-quarter results for fiscal 2025. Revenue increased 6% year-over-year (YOY) to $71.1 million. Additionally, PubMatic reported that its CTV revenue grew more than 50% YOY, while revenue from omnichannel video, including CTV, grew 34% YOY and accounted for 41% of total revenue. PubMatic’s net dollar-based retention rate was 102% for the trailing 12 months ended June 30.
PubMatic also launched its PubMatic Assistant, an AI-powered analytical engine with a chat-based interface that provides buyers with insights, supports decision-making, and helps with troubleshooting.
On the other hand, the company is facing some bottom-line pressures. Its adjusted EBITDA margin dropped from 31% in Q2 2024 to 20% in Q2 2025. Meanwhile, non-GAAP EPS was $0.05, down from $0.17 in the prior-year period.
CEO Rajeev Goel believes that the industry is at an inflection point, with AI changing how advertising operates. Goel also iterated how the “lines between SSPs and DSPs are blurring.” The company stands to benefit from diversifying its DSP base.
Meanhwile, CFO Steve Pantelick noted that PubMatic’s financial outlook accounts for a reduction in ad spend from one of the company’s top DSP partners. In the third quarter, revenue is expected to be in the range of $61 million to $66 million. Adjusted EBITDA is projected to be approximately a 13% margin.
Wall Street analysts do not have a favorable view of PubMatic’s bottom-line growth. For the current fiscal year, analysts expect loss per share to deepen significantly from the prior year to $0.55.
Wall Street analysts still show a favorable view of PubMatic’s prospects. Last month, Rosenblatt analyst Barton Crockett maintained a “Buy” rating on PUBM shares with a $17 price target.
In August, analysts at Evercore ISI maintained an “Outperform” rating on PUBM stock. Still, they downgraded the price target from $16 to $12, following the subdued outlook the company issued in its Q2 report. Amid DSP headwinds, analysts at RBC Capital also cut their price target from $14 to $11, while maintaining an “Outperform” rating.
Wall Street analysts are soundly bullish on PubMatic stock, with a consensus “Moderate Buy” rating overall. Of the 13 analysts rating the stock, four give a “Strong Buy” rating, one has a “Moderate Buy,” and eight provide a “Hold.” The consensus price target of $11.28 represents 36% potential upside from current levels. The Street-high price target of $17 implies 104% potential upside from current levels.
Although the company’s bottom line is going through some snags, its topline is still growing. Analysts still maintain a favorable view of PubMatic’s prospects, and the Nvidia partnership is expected to benefit its AI integration process. Therefore, it may be wise to consider investing in PUBM stock.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com