PubMatic (PUBM) stock has fallen 38 percent over the last three months. The stock has returned to a valuation that's more in line with its long-term prospects. What’s the forecast for PUBM stock and can Redditors trigger a short squeeze in the stock?
PubMatic is engaged in the digital advertising business. The company went public in December 2020. PubMatic stock rose as much as 65 percent on its listing debut. Now, the stock is 73 percent above its IPO price of $20 per share.
PubMatic’s short interest
The short interest in PubMatic stock has increased. According to Fintel, on July 9, around 0.45 million PubMatic shares were sold short, which represents almost 24 percent of the volumes that day. On July 8, about 0.12 million PubMatic shares were sold short. Approximately 32 percent of its outstanding float has been sold short. The high volume of negative bets implies that it might be a candidate for a short squeeze.
Can WallStreetBets trigger a short squeeze in PUBM stock?
The WallStreetBets community on Reddit has gained a name for itself by triggering a short squeeze in a number of stocks, including GameStop and AMC Entertainment. Currently, PUBM stock isn't popular on WallStreetBets. I wouldn’t be surprised if Reddit traders target PUBM stock for a short squeeze due to its significant short interest, attractive valuations, and healthy financial performance.
PubMatic’s stock forecast
According to MarketBeat, analysts' average target price for PubMatic stock is $46.83, which is 35 percent above its current price. Among the eight analysts tracking PubMatic, six recommend a buy and two recommend a hold. None of them recommend a sell. Their highest target price of $64 is 84 percent above the stock's current price, while their lowest target of $34 is 2 percent below.
PubMatic stock looks attractively valued.
PubMatic has an EV (enterprise value) of around $1.6 billion and is expected to generate revenues of $198.4 million in 2021, which would mean a 2021 EV-to-sales multiple of 8.1x. The multiple looks reasonable compared to Magnite, which has NTM EV-to-sales multiples of 9.1x.
PubMatic stock is a good long-term investment.
PubMatic stock has been volatile in 2021. The shares of the supply-side advertising technology company have stabilized after Alphabet’s subsidiary Google delayed the phasing out of third-party cookies from 2022 to 2023. Google’s announcement has given ad tech companies more time to decide how they will proceed in a cookie-less world.
In the first quarter, PubMatic’s revenues increased by 54 percent YoY to $43.6 million, while the net profit soared 444 percent YoY to $4.9 million. The company reported a net dollar-based retention rate of 130 percent for the trailing 12 months ended March 2021. As of March 31, 2021, PubMatic had cash and cash equivalents and marketable securities of $110 million with no long-term debt on its balance sheet.
In 2021, PubMatic expects to report revenues and adjusted EBITDA between $195 million and $200 million and $54 million and $58 million, respectively. The global programmatic ad spending is expected to go up by 20 percent YoY to $155 billion in 2021. PubMatic is expected to benefit from the growth of the connected TV ad market over the next few years.