In this article, we discuss 10 ad-tech stocks to buy as the industry goes through upheavals. If you want to see more stocks in this selection, check out 5 Ad-Tech Stocks to Buy as Industry Goes Through Upheaval.
The ad-tech space has witnessed a long-running battle between industry titans, Apple Inc. (NASDAQ:AAPL) and Meta Platforms, Inc. (NASDAQ:META), as they fight for market share. The companies are gunning for similar areas of expertise. For example, Meta Platforms, Inc. (NASDAQ:META) CEO Mark Zuckerberg announced his firm’s foray into virtual-reality tech, and Apple Inc. (NASDAQ:AAPL)’s Tim Cook disclosed that he is also looking into the same. Similarly, Meta recently started testing encrypted chats, a domain Apple has monopolized for years.
Apple has a track record of maintaining user privacy, while Meta has been under fire for sharing user data on countless occasions. Apple’s latest changes to its iOS led to a $10 billion revenue hit for Meta. However, advertisers who depended on Meta’s data for targeted ads and insights on Facebook and Instagram were impacted negatively.
Ever since Apple Inc. (NASDAQ:AAPL)’s Tim Cook stated that ad-based businesses had no link with real-world violence, the company has juiced up its efforts to feed more ads to iPhone users and use advanced tech for targeted ads. Apple seems to be on a warpath, and it is adamant on stealing the small and medium-sized businesses who have relied on Facebook’s ad platform for over a decade. Apple Inc. (NASDAQ:AAPL) is aggressively building up an ad-tech team that incorporates privacy into targeted advertising efforts.
Since Apple is offering greater privacy, small businesses might just jump ship from Meta Platforms, Inc. (NASDAQ:META)’s ad platforms to Apple. This will decidedly hurt Meta’s entire business structure.
While there is a paradigm shift in the ad-tech market, some of the best stocks to buy as the industry navigates these upheavals include The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG).
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Our Methodology
We selected stocks in the ad-tech market that have huge growth potential. We chose these stocks based on positive analyst ratings, strong underlying fundamentals, and solid future catalysts. We have arranged the list according to the hedge fund sentiment around the securities, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
Let’s start our list of the ad-tech stocks to buy as the industry goes through upheavals.
Ad-Tech Stocks to Buy as Industry Goes Through Upheavals
10. fuboTV Inc. (NYSE:FUBO)
Number of Hedge Fund Holders: 9
fuboTV Inc. (NYSE:FUBO) is a New York-based company offering streaming television services. Together with Kantar, a London-based data analytics and brand consulting company, fuboTV Inc. (NYSE:FUBO) helps advertisers understand the effectiveness of their brand campaigns and carry out CTV advertising.
On August 16, fuboTV Inc. (NYSE:FUBO)’s CFO John Janedis said that the company is working towards long-term adjusted EBITDA profitability and positive cash flow goals, which it expects to realize in 2025. He predicts fuboTV Inc. (NYSE:FUBO)’s revenue to more than double between 2022 and 2025, and also forecasts higher average revenue per user on subscriptions and ads. He noted that the churn around the firm’s latest price hike was smaller than anticipated. This makes fuboTV Inc. (NYSE:FUBO) one of the best ad-tech stocks to buy as the industry experiences turbulence.
Needham analyst Laura Martin on August 18 raised the price target on fuboTV Inc. (NYSE:FUBO) to $7 from $5 and maintained a Buy rating on the shares. The company’s Investor Day presentation reaffirmed its commitment to be cash flow positive by 2025, as well as its new target to achieve an adjusted EBITDA margin of 15% in 2025, the analyst told investors in a research note. She also cited fuboTV Inc. (NYSE:FUBO)’s plans to introduce an ad-driven tier, which should boost its total addressable market.
According to Insider Monkey’s data, 9 hedge funds were long fuboTV Inc. (NYSE:FUBO) at the end of Q2 2022, compared to 16 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest position holder in the company, with 5.6 million shares worth $13.80 million.
Like The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), fuboTV Inc. (NYSE:FUBO) is one of the stocks to watch as the ad-tech industry transforms.
Here is what Bireme Capital specifically said about fuboTV Inc. (NYSE:FUBO) in its second quarter 2022 investor letter:
“In contrast, we don’t foresee fuboTV Inc. (NYSE:FUBO) finding a profitable business model. The company, which operates a streaming TV service, still has negative gross margins and in 2021 generated over $300m in operating losses. This company may end up in bankruptcy, given that it already carries around $400m of debt and looks set to burn over $300m of cash this year. The stock has fallen from $26 when we last mentioned it to $2.60 today. We remain short.”
9. Integral Ad Science Holding Corp. (NASDAQ:IAS)
Number of Hedge Fund Holders: 12
Integral Ad Science Holding Corp. (NASDAQ:IAS) operates as a digital advertising verification company in the United States, the United Kingdom, Germany, Italy, Spain, Sweden, Singapore, Australia, France, Japan, Canada, India, and Brazil. In addition to providing actionable insights via its cloud platform, Integral Ad Science Holding Corp. (NASDAQ:IAS) specializes in digital advertising across multiple devices, channels, and formats, such as desktop, mobile, connected TV, social, display, and video. The company’s Q2 revenue of $100.33 million climbed 33.6% year-over-year, beating estimates by $2.51 million.
On August 8, Wells Fargo analyst Brian Fitzgerald reaffirmed an Overweight rating on Integral Ad Science Holding Corp. (NASDAQ:IAS) and lowered the price target on the shares to $21 from $28. The analyst noted that the company had strong Q2 results, exceeding top and bottom-line estimates and guidance. Integral Ad Science Holding Corp. (NASDAQ:IAS) revised its full year 2022 outlook lower, due to macro headwinds leading to softer ad spend, minor delays in new activations, and longer sales cycles. However, the analyst views its volume-driven model as somewhat protected from a larger media recession and continues to believe that Integral Ad Science Holding Corp. (NASDAQ:IAS)’s long-term opportunity is intact.
Among the hedge funds tracked by Insider Monkey, 12 funds were long Integral Ad Science Holding Corp. (NASDAQ:IAS) at the end of June 2022, compared to 15 funds in the last quarter. Robert Smith’s Vista Equity Partners is the biggest stakeholder of the company, with 94.3 million shares worth $937 million.
8. DoubleVerify Holdings, Inc. (NYSE:DV)
Number of Hedge Fund Holders: 12
DoubleVerify Holdings, Inc. (NYSE:DV) is a New York-based company that provides a software platform for digital media measurement and data analytics in the United States and internationally. The company’s solutions offer advertisers unbiased data insights that raise the effectiveness, quality, and return on their digital advertising investments.
On August 4, the company reported top-line Q2 results and boosted guidance on the back of record activation revenue and ongoing momentum on social and CTV platforms. DoubleVerify Holdings, Inc. (NYSE:DV) expects full-year 2022 revenue of $448 million to $450 million, exceeding market estimate of $441.88 million. Barclays analyst Raimo Lenschow on August 4 raised the price target on DoubleVerify Holdings, Inc. (NYSE:DV) to $27 from $21 and kept an Equal Weight rating on the shares following the “strong” Q2 results.
According to Insider Monkey’s data, DoubleVerify Holdings, Inc. (NYSE:DV) was part of 12 hedge fund portfolios at the end of Q2 2022, compared to 16 funds in the last quarter. Chase Coleman’s Tiger Global Management is the leading shareholder of the company, with 2.8 million shares worth $63.3 million.
In its Q2 2021 investor letter, Baron Discovery Fund mentioned DoubleVerify Holdings, Inc. (NYSE:DV). Here is what the fund said:
“DoubleVerify, Inc. is a software platform for digital media measurement and analytics. Founded in 2008, its mission is to increase the effectiveness and transparency of the digital advertising ecosystem through the metrics provided on its platform. DoubleVerify directly analyzes over five billion digital ad transactions daily, measuring whether ads are delivered in a fraud-free, brandsafe environment and are fully viewable in the intended geography. Advertisers are increasingly searching for third-party verification as they attempt to maximize their return on investment in the fast-growing digital advertising market. As such, DoubleVerify’s revenue has grown at over a 50% compounded annualized rate from 2017 to 2020 and is expected to grow approximately 30% over the next few years with favorable margins. We expect future growth to be driven by strong category growth across digital advertising as well as new and existing customer growth, product innovation, international expansion, and potential M&A. DoubleVerify is the market leader in its segment boasting integration across major demand-side platforms and partnerships with major social advertising platforms (Facebook, Twitter, Pinterest, etc.). Combining all of these factors, we feel confident in underwriting DoubleVerify as a strong “Barontype” investment: a competitively differentiated business in a secularly growing industry with a strong management team. We expect that increased demand for third-party digital advertising data analytics will fuel continued adoption of DoubleVerify’s solutions across key channels, formats, devices, and geographies.”
7. PubMatic, Inc. (NASDAQ:PUBM)
Number of Hedge Fund Holders: 12
PubMatic, Inc. (NASDAQ:PUBM) is a California-based company that provides a cloud infrastructure platform that enables real-time advertising transactions for internet content creators and advertisers worldwide. In Q2 2022, the company posted a beat in its Q2 non-GAAP EPS and revenue. According to the company’s CEO Rajeev Goel, the main growth drivers included strength in the Americas region, CTV publisher acquisition, existing publisher expansion, and supply path optimization. For FY22, the revenue guidance was revised to $277 million to $281 million, reflecting 23% growth at the midpoint. Due to ongoing positive catalysts and potential for future growth, PubMatic, Inc. (NASDAQ:PUBM) classifies as one of the ad-tech stocks that must be considered amid industry upheavals.
On August 9, JMP Securities analyst Andrew Boone maintained an Outperform rating on PubMatic, Inc. (NASDAQ:PUBM) and lowered the price target on the shares to $34 from $40. The company’s Q2 results were “excellent” as revenue growth climbed to 27% and EBITDA margins of 36.6% came in ahead of the high end of guidance, the analyst told investors. At 7.0-times expected 2023 EBITDA at $19.30 in after hours trading, the stock remains undervalued, the analyst added.
According to Insider Monkey’s Q2 data, 12 hedge funds were bullish on PubMatic, Inc. (NASDAQ:PUBM), compared to 14 funds in the prior quarter. Jim Simons’ Renaissance Technologies held the leading position in the company, with 767,500 shares worth $12 million.
6. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 23
Magnite, Inc. (NASDAQ:MGNI) is a New York-based company that provides an independent sell-side advertising platform in the United States and internationally. On August 10, Susquehanna analyst Shyam Patil reaffirmed a Positive rating on Magnite, Inc. (NASDAQ:MGNI) but lowered the price target on the shares to $13 from $24. The analyst said they reported a solid Q2, with CTV outperforming expectations despite macro headwinds. He said although the guidance was slightly lower given the tough macro, most of the weakness is from desktop, not CTV. Magnite, Inc. (NASDAQ:MGNI) remains one of the ad-tech stocks to buy as the industry faces volatility.
According to Insider Monkey’s data, 23 hedge funds were bullish on Magnite, Inc. (NASDAQ:MGNI) at the end of the second quarter of 2022, compared to 28 funds in the last quarter. Nine Ten Partners is a notable position holder in the company, with 2.36 million shares worth $21 million.
In addition to The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), Magnite, Inc. (NASDAQ:MGNI) is one of the ad-tech stocks on the radar of smart investors.
Here is what Alger has to say about Magnite, Inc. (NASDAQ:MGNI) in its Q2 2021 investor letter:
“Magnite provides an advertising supply side platform for publishers. The technology helps publishers such as network television stations or cable news providers automate the sale of digital advertising inventory across different formats and channels, like desktop, mobile, video, audio, connected TV and over-the-top TV. Publishers monetize their digital advertising inventory by using Magnite’s platform to access a global market of ad buyers, including advertising agencies that use supply side platforms. Magnite also helps sellers decrease costs and protect their brands and user experience. Magnite receives ad inventory from sellers and optimizes publishers’ revenue yields by processing the highest buyer bids. Currently, Magnite keeps approximately 10% of ad spend as revenue (i.e. take rate) and passes on the remainder of the ad spend to publishers. Magnite’s clients include many of the world’s leading publishers of websites and mobile applications and the company believes that its platform reaches approximately 1 billion individuals globally.
Shares of Magnite underperformed in the second quarter due to the growth market selloff and slower-than-expected growth in connected TV during the first three months of this year. We believe the 32% growth in connected TV was below expectations and due to a one-time issue with one of the company’s publishing partners that ran out of advertising inventory. Management noted the issue has been fixed and the company saw strong reaccelerating growth in April. Additionally, we believe Magnite’s recent acquisition of video advertising company SpotX will significantly bolster the company’s positioning within connected TV, a high-growth area of the digital advertising market that is taking share from linear TV ad budgets.”
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Disclosure: None. 10 Ad-Tech Stocks to Buy as Industry Goes Through Upheaval is originally published on Insider Monkey.