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Should MediaAlpha Stock Be in Your Portfolio Pre-Q4 Earnings?

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MediaAlpha, Inc. (MAX - Free Report) will report its fourth-quarter 2024 results on Feb. 24, after market close.

See Zacks Earnings Calendar to stay ahead of market-making news.

The consensus estimate for total earnings is pinned at 24 cents per share, implying a more than 100% year-over-year rise. The Zacks Consensus Estimate for revenues in the to-be-reported quarter is pegged at $287.9 million, suggesting more than 100% growth on a year-over-year basis.

 

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The company has an impressive earnings surprise history. It surpassed the Zacks Consensus Estimate in the trailing four quarters, delivering an average earnings surprise of 109.7%.

MediaAlpha’s Lesser Chance of Q4 Earnings Beat

Our proven model does not conclusively predict an earnings beat for MAX this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

MediaAlpha has an Earnings ESP of 0.00% and a Zacks Rank #3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Higher Pricing & Volumes to Have Been MAX’s Drivers in Q4

The company’s top line is likely to have been driven by Property & Casualty (P&C) transaction value benefiting from growing pricing and higher volumes as participation in MAX’s marketplaces continues to scale. The consensus mark for Transaction value is $488.1 million, suggesting more than 100% year-over-year growth.

MediaAlpha Stock Declines

MAX shares have declined 25.1% in the past six months. Its industry has surged 78% and the Zacks S&P 500 composite has risen 10.1%. The company’s stock has lost its value significantly in comparison with its industry peers, Agora, Inc. (API - Free Report) and Outbrain Inc. (OB - Free Report) . API has skyrocketed 163.3% and OB has gained 42.7% over the same period.

Six Months' Price Performance

 

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The stock is looking cheaper and is currently trading at a trailing 12-month price-to-earnings ratio of 12.8X, well below the industry’s 50.9X.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

MediaAlpha’s Investment Considerations

MediaAlpha operates as the largest insurance customer acquisition media marketplace with strong long-term partnerships. This marketplace model is its key differentiator and provides a competitive edge that establishes the company as a growth partner of choice.

MAX’s top line is anticipated to have been driven by momentum in the P&C vertical as auto insurance underwriting profitability improves. The multi-year extension with Insurify is instrumental in portraying MAX’s market leadership position, which enables it to evaluate opportunities to expand and deepen supply partnerships.

Meanwhile, headwinds in the Medicare payer space are likely to hurt the health vertical despite the fourth quarter being seasonally strongest. The company does not pay or plans to pay dividends, which might raise questions about its cash position.

Final Thoughts: Hold MediaAlpha for Now

A robust marketplace model, coupled with healthy performance in the P&C vertical, sets the company for long-term growth. The ability to demonstrate market leadership is another advantage. However, headwinds in the Medicare payer domain and reluctance to pay dividends are concerning.

While MAX remains fundamentally strong and possesses a discounted valuation, a cautious approach is warranted. This is because the steep fall in share prices over the past six months indicates declining investor confidence, which may result in a further price decline, especially if the company fails to beat on earnings.


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