PubMatic Stock Presents Opportunity to Risk $8 for Returns as High as $50

PubMatic Inc Is a Contrarian Digital Media Play

The digital advertising sector is on its way up, overtaking print media, which has been steadily declining. One study says the global digital advertising market will grow to $645.8 billion by 2024, representing a compound annual growth rate (CAGR) of 14.3%. (Source: “Digital Advertising Spending Worldwide From 2019 to 2024,” Statista, last accessed April 4, 2022.)

There are numerous ways to play the strong tailwinds in the digital advertising industry. Investors can seek out shares of digital advertising giants, or, if they’re looking for a smaller contrarian opportunity, they can consider shares of PubMatic Inc (NASDAQ:PUBM).

PubMatic provides a cloud-based sell-side advertising platform that connects publishers and app developers who are looking to generate revenue from targeted advertising.

Its operations are carried out via 15 offices and eight data centers in North America, Europe, and Asia Pacific.

While PubMatic Inc’s potential is excellent, PUBM stock has been taking it on the chin, down by 57% from its 52-week of $62.25 in April 2021. In March 2021, PubMatic went as high as $76.96.

At its current low price, PubMatic stock has seen heavy insider buying, to the tune of a net 14.1 million shares over the last six months. (Source: “PubMatic, Inc. (PUBM),” Yahoo! Finance, last accessed April 4, 2022.)

Strong Risk/Reward Opportunity With PUBM Stock

The below chart shows PubMatic stock rallying from its initial public offering (IPO) price of $20.00 in December 2020.

The ride to its high in March 2021 was driven by euphoria about technology stocks.

Chart courtesy of StockCharts.com

Shares of PubMatic Inc failed to hold at their high, and they subsequently moved into a bearish descending triangle pattern. PUBM stock broke below its 50-day and 200-day moving averages to a major chart support level around $22.00 to $23.00.

PubMatic stock managed to hold at its support level and bounce back from October to December 2021, prior to re-establishing its downside.

The trading in PUBM stock has been erratic, reflecting the indecision among traders. Shares of PubMatic Inc fell to $18.00 after failing to hold at their support level.

PubMatic stock bounced after declining below its major support level, and it’s currently rising. A rise in relative strength and moving average convergence/divergence (MACD) supports PUBM stock’s current rally to above its 50-day moving average.

Chart courtesy of StockCharts.com

Sustained strength could drive shares of PubMatic Inc back to their 200-day moving average of $29.82.

If PubMatic stock can break higher, the horizontal Fibonacci retracement levels (the blue horizontal lines in the above chart) suggest a potential move toward key resistance at $40.71, followed by $47.50, $54.55, and its high of $76.96.

Analyst Take

My bull thesis for PubMatic Inc is supported by strong tailwinds in the digital advertising market.

Moreover, PUBM stock’s technical chart shows a decent risk/reward tradeoff, with downside risk of about $8.00 and upside of at least $14.00 in returns.