What happened

Shares of Magnite (NASDAQ: MGNI) dropped by as much as 16% today after getting a downgrade from Wall Street. As of 2:40 p.m. EST, shares had somewhat recovered and were only down 9%.

So what

Truist Securities downgraded its rating on Magnite shares from buy to hold, while analyst Matthew Thornton adjusted his price target from $12 to $37 to accommodate for the recent rally. The jump has put Magnite's valuation into ambitious territory and altered the risk/reward profile. Current levels properly value the company's prospects, and the possibility of slowing growth in the second half of 2021 could create some risks, in Thornton's view.

Image source: Getty Images.

The advertising technology stock had jumped to all-time highs on Friday after Craig-Hallum boosted its price target from $25 to $45.

Now what

Thornton boosted his forecasts but warned that growth in the second half of the year could decelerate to 12%, down from the 60% expected in the first half. Some of the recent growth has been due to the merger with Telaria, which closed last April. Additionally, the COVID-19 pandemic affected the advertising industry in mid-2020, which will create favorable year-over-year comparisons.

Magnite faces some other possible risks around the long-term take rate as well as potential concerns around data privacy, according to Thornton, but should continue to benefit from the shift of advertising budgets to connected-TV platforms. The company is scheduled to report fourth-quarter results on Feb. 24.

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Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Magnite, Inc. The Motley Fool has a disclosure policy.