BofA: Alphabet Inc. Class C antitrust ruling delivers a "big gift," raises ad platform Magnite (MGNI.US) price target to $38

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, prompting Bank of America Corp securities analyst Omar Dessouky to raise the ad platform's price target by more than 50% to $38. Even after the stock rose nearly 10% on Tuesday, this price target still implies 48% upside. The DOJ ruling found that Magnite and its peers' ad win rates have long been suppressed by monopolistic mechanisms. The core reason is that Alphabet Inc. Class C (GOOGL.US) ad exchange (AdX) has near-exclusive control of the largest source of ad demand, while also possessing the pricing and audience data that support its bidding algorithm. Dessouky accordingly judges that in a fair auction environment, Alphabet Inc. Class C AdX's win rate could fall to as low as 30%. Dessouky expects that, under the behavioral remedies already adopted in the DOJ's unsealed memorandum opinion, ad spend monopolized by the Alphabet Inc. Class C AdX exchange will flow to competitors including Magnite. Dessouky said: "We estimate that Magnite's share of open web display ad spend will rise from 6% to 8%-10%, pushing the DV+ business into a growth trajectory; whereas the previous outlook was low growth or even zero growth." As a result, the analyst raised his 2028 EBITDA estimate for Magnite by 28%, and believes there is room for further upward revisions to this earnings metric if Magnite achieves a truly fair bidding environment within Alphabet Inc. Class C's ad traffic pool, while its win rate in existing ad traffic continues to improve. He wrote: "Overall, we believe that over the next few years, Alphabet Inc. Class C AdX could cede up to nearly half of its 60% market share to four major competitors."