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3 Reasons to Sell PUBM and 1 Stock to Buy Instead

By Max Juang | August 04, 2025, 12:00 AM

PUBM Cover Image

What a brutal six months it’s been for PubMatic. The stock has dropped 26.2% and now trades at $11.47, rattling many shareholders. This may have investors wondering how to approach the situation.

Is now the time to buy PubMatic, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is PubMatic Not Exciting?

Despite the more favorable entry price, we don't have much confidence in PubMatic. Here are three reasons why there are better opportunities than PUBM and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Over the last three years, PubMatic grew its sales at a weak 6.6% compounded annual growth rate. This fell short of our benchmark for the software sector.

PubMatic Quarterly Revenue

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect PubMatic’s revenue to rise by 4.4%, a slight deceleration versus This projection is underwhelming and implies its products and services will face some demand challenges.

3. Low Gross Margin Reveals Weak Structural Profitability

For software companies like PubMatic, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.

PubMatic’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 64.9% gross margin over the last year. That means PubMatic paid its providers a lot of money ($35.09 for every $100 in revenue) to run its business.

PubMatic Trailing 12-Month Gross Margin

Final Judgment

PubMatic isn’t a terrible business, but it doesn’t pass our bar. Following the recent decline, the stock trades at 1.8× forward price-to-sales (or $11.47 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. Let us point you toward an all-weather company that owns household favorite Taco Bell.

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