Disney appears to be re-evaluating its partnership with Magnite.
Magnite, a sell-side adtech platform, experienced a significant decline in its shares, falling by 10.8%, following reports that Walt Disney might cease using Magnite for its Disney Real-Time Ad Exchange (DRAX) with certain demand-side platforms (DSPs).
During the Digiday Publishing Summit, Jamie Power, Disney’s Senior Vice President of Addressable Sales, announced that Disney is no longer utilizing Magnite with two DSPs, namely Alphabet and The Trade Desk. This development suggests a potential loss of business for Magnite.
However, several Wall Street analysts mitigated the market’s reaction, suggesting that the information was not new and arguing that the stock sell-off presented a purchasing opportunity. Benchmark, represented by analyst Daniel Kurnos, noted that the news originally surfaced back in March and was already factored into the stock’s price. Kurnos also stated it was improbable that Disney would develop a complete end-to-end advertising stack without Magnite.
Analysts from Craig-Hallum and Needham echoed this sentiment, indicating that the decline in Magnite’s stock price provided a buying opportunity.
Despite the 11% stock decline, the consequences of Disney’s decision remain partly speculative and not entirely understood at this stage. Like other adtech companies, Magnite has faced challenges post-pandemic. The earlier surge in digital advertising growth has slowed, reducing investor enthusiasm.
Magnite has struggled to boost its growth rate, with a revenue increase of just 7% in the second quarter. Regardless of the recent setback with Disney, Magnite will need to improve these figures to enhance its stock performance.
