Shares of programmatic advertising expert MediaAlpha (MAX 21.52%) surged as much as 22.7% higher on Wednesday morning, lifted by a Street-stumping earnings report. The stock is reaching fresh multiyear highs today, notching prices not seen since October 2021.
How MediaAlpha beat Wall Street forecasts
MediaAlpha’s fourth-quarter sales fell 6% year over year to $117 million, while the transaction value under management decreased by a milder 2% to $165 million. On the bottom line, the adjusted net loss shrank from $0.63 to $0.05 per share. Your average Wall Street analyst would have settled for sales near $112 million and a more damaging loss of roughly $0.18 per share.
The results also outpaced MediaAlpha’s own projections, chiefly powered by an extensive marketing campaign for an unnamed customer in the property and casualty (P&C) insurance sector. Management expects this segment to deliver robust results in the first quarter as well, inspiring guidance for a smaller revenue decline and approximately 45% stronger profits in the first quarter.
A brighter future
MediaAlpha’s management finally sees the light at the end of a long, dark tunnel. The company mainly provides digital marketing solutions for insurance carriers, and that industry is making an ad-spending comeback right now.
“Following a historic downturn, we believe the P&C underwriting cycle has finally turned,” CEO Steve Yi said in a prepared statement. “While most carriers have yet to reach rate adequacy and fully resume their marketing investments, we are seeing clear signs of a market recovery and believe we are entering a period of sustained growth in P&C carrier marketing investments.”
In other words, the inflation-based limits on advertising budgets are starting to lift, one specific subsector of the insurance market at a time.
So the company is getting back on its feet after a few difficult years. At the same time, this is not my best investment idea in the adtech market today, whether you’re looking for deep value or impressive growth prospects. I suggest betting on the digital advertising rebound elsewhere while keeping a curious eye on MediaAlpha in the long run.
Anders Bylund has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
