Viant Technology (NASDAQ: DSP) recently experienced a sharp decline in its stock value, shedding over 30% after its second-quarter earnings release. This significant drop was primarily triggered by a revised outlook for the third quarter, which projected a substantial slowdown in growth. The company anticipates only a 6% increase in Contribution ex-TAC, a marked decrease from the 16% growth recorded in Q2. This deceleration is largely attributed to transient challenges, specifically a reduction in political advertising expenditure and the discontinuation of services from a major client associated with an agency partner. Despite these short-term obstacles, the underlying strength of Viant's business, particularly its extensive involvement in the Connected TV (CTV) market, continues to drive a robust core growth rate of approximately 20%.
The company's prospects for the coming year appear promising, with expectations of a return to a 20% growth trajectory in Contribution ex-TAC. This projection is based on the temporary nature of the current headwinds and the enduring demand within the CTV advertising sector. Furthermore, the stock's current valuation suggests an attractive investment opportunity, trading at just 8 times next year's anticipated free cash flow. While the competitive landscape poses a persistent risk, similar to challenges faced by industry leaders like The Trade Desk, the author maintains a positive outlook, reiterating a Buy rating on Viant Technology's stock.
The recent stock performance of Viant Technology, though challenging, underscores the dynamic nature of the ad-tech industry. Temporary market shifts and client changes can certainly impact short-term forecasts. However, for investors with a long-term perspective, focusing on fundamental strengths and growth drivers like the expanding CTV market is crucial. This situation highlights the importance of distinguishing between temporary setbacks and structural weaknesses, allowing for informed investment decisions that capitalize on underlying value and future potential.