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Investing.com - PubMatic Inc (NASDAQ:PUBM) saw its price target lowered by Scotiabank (TSX:BNS) from $15.00 to $10.00 on Tuesday, while maintaining a Sector Perform rating on the stock. According to InvestingPro data, the stock is currently trading at a P/E ratio of 93.2x, suggesting a premium valuation, while four analysts have recently revised their earnings expectations downward.
The price target reduction follows PubMatic’s disappointing third-quarter guidance, which sent shares tumbling approximately 20% in after-hours trading. The stock has already declined 38.3% over the past six months, according to InvestingPro data. While the company posted modest top-line and gross margin beats in its quarterly results, with an impressive gross margin of 64.9%, along with a small bottom-line beat of about 4 cents, the outlook overshadowed these achievements.
PubMatic guided third-quarter revenue to $61-66 million, representing an 11% year-over-year decline at the midpoint, compared to consensus expectations of $71 million. The company also projected adjusted EBITDA of $7-10 million versus consensus estimates of approximately $15 million.
Management attributed part of the revenue weakness to reduced spending from a large DSP buyer (Google (NASDAQ:GOOGL)). The company also noted that dollar weakness created some incremental foreign exchange impact on adjusted EBITDA.
Despite the negative outlook, Scotiabank acknowledged several positive factors, including PubMatic’s debt-free balance sheet, ongoing share repurchases, and decent free cash flow generation, while noting the company has historically been a "rule of 40" company that could potentially return to that margin profile.
In other recent news, PubMatic Inc. reported its second-quarter 2025 earnings, revealing a significant revenue increase. The company achieved $71.1 million in revenue, surpassing the forecasted $67.84 million, marking a 4.81% surprise. Despite this, earnings per share fell short, with an EPS of $0.05 compared to the expected -$0.16. Following these results, B.Riley downgraded PubMatic’s stock from Buy to Neutral, reducing its price target to $9.00 from $17.00, citing issues with a demand-side platform partner. JMP Securities also lowered its price target to $12.00 from $16.00 while maintaining a Market Outperform rating, noting headwinds affecting third-quarter revenue guidance. Wolfe Research cut its price target to $10.00 from $15.00, highlighting challenges with two large DSPs but recognizing the company’s positive balance sheet and cash flow. Jefferies adjusted its price target to $10.00 from $12.00, maintaining a Hold rating due to weaker third-quarter guidance. These developments reflect ongoing challenges for PubMatic despite its strong second-quarter performance.
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