IAS - Ad-techs dip as KeyBanc cuts PubMatic Taboola

Ad technology names are seeing a few heavy declines as KeyBanc's earnings preview embraces a "modest" ad recession, and downgrades a couple of players.

The bank cut ratings on PubMatic ( NASDAQ: PUBM ) and Taboola ( NASDAQ: TBLA ) to Sector Weight from Overweight, with analyst Justin Patterson saying that "European exposure and inventory mix make both companies overly sensitive to ad budget headwinds."

"Given high fixed cost bases, we believe decelerating revenue growth elevates margin pressure through 2023," Patterson said. "Absent industry consolidation, we see few catalysts over the next 12-18 months to suggest budgets return to PubMatic or Taboola faster than peers."

In any case, those companies are late-cycle recoveries and deserve to have consensus estimates moderated "considerably."

It's also cutting its price target on The Trade Desk ( NASDAQ: TTD ) to $52 from $55, trimming implied upside to 16%. Patterson is cutting revenue expectations for 2022 by less than 1%, but trimming 2023 forecasts by 5%, and cutting EBITDA estimates by 1% and 6% respectively.

TTD's exposure to connected TV and healthcare, and its ramp in retail media and political spend, will make a "material deceleration." That's a lower growth profile, but better than many investors fear, Patterson said.

Overall KeyBanc favors ad-tech companies with exposures to connected TV (a secular growth channel) and the United States (from a foreign-exchange and relative economic strength view) - which leads it to maintain that The Trade Desk ( TTD ) is best positioned among the group's names.

The Trade Desk ( TTD ) is up 1% but seeing choppy trading early Monday. Elsewhere in the sector, though, PubMatic ( PUBM ) is -6.6% ; Taboola ( TBLA ) -2.9% ; Innovid ( CTV ) -3.9% ; AppLovin ( APP ) -5% ; Criteo ( CRTO ) -3.1% ; Interactive Ad Science ( IAS ) -2.4% ; Viant Technology ( DSP ) -1% ; Magnite ( MGNI ) -1.6%.

As a group, the ad-tech names made a jump on Wednesday off the news that Google was again delaying a move to end support for third-party tracking cookies .

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