In this article, we discuss 10 best adtech stocks to buy according to hedge funds. If you want to see more stocks in this selection, check out 5 Best Adtech Stocks To Buy.
Although there is weakness in the ad market driven by an uncertain economic outlook and expectations that a potential recession will crush consumer demand, ad-tech stocks remain comparatively resilient. This is because marketers are now more selective with their advertising budget, which means they are looking to spend those ad dollars efficiently. They now rely more on data and technology when it comes to marketing their products and services. Ad-tech firms are also benefiting from the transformation of ad spending from linear TV to connected TV.
In the beginning of December, media buyer GroupM forecast that traditional TV ad spending would decline by 3.8% to $64.4 billion in 2023, with the drop offset by a 19% increase in ad spending on connected TV to $13.3 billion. The media buyer sees a similar pattern in 2024 and 2025 as well, while CTV spending will accelerate by 1.8% to $20 billion by 2026.
Jeff Green, founder and CEO at The Trade Desk, Inc. (NASDAQ:TTD), announced that his company’s revenues rose 31% in the third quarter of 2022. In an earnings call, he said:
“It is very clear that under the current operating conditions, we are significantly outpacing the market regardless of the macro environment.”
Some of the best adtech stocks to invest in include The Interpublic Group of Companies, Inc. (NYSE:IPG), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG).
Our Methodology
We selected the following adtech stocks using overall hedge fund sentiment towards each stock. We have assessed the hedge fund sentiment from Insider Monkey’s database of 920 elite hedge funds tracked as of the end of the third quarter of 2022. The list is arranged according to the number of hedge fund holders in each firm. We also talked about positive analyst coverage, strong business fundamentals, and market visibility.
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Best Adtech Stocks To Buy According To Hedge Funds
10. fuboTV Inc. (NYSE:FUBO)
Number of Hedge Fund Holders: 9
fuboTV Inc. (NYSE:FUBO) is a New York-based live TV streaming platform for live sports, news, and entertainment content in the United States and internationally. Its fuboTV platform offers access to content through streaming devices like SmartTVs, computers, mobile phones, and tablets. fuboTV Inc. (NYSE:FUBO) allows businesses to run their ads on its premium content.
On December 21, fuboTV Inc. (NYSE:FUBO) shares climbed after the company announced that it had signed a deal with Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) to bring its “19 Bally Sports” regional sports networks to Fubo’s platform “in the coming weeks.” On December 20, fuboTV Inc. (NYSE:FUBO) also agreed to a multi-year distribution partnership with Scripps Networks, the national television network division of The E.W. Scripps Company (NASDAQ:SSP).
Needham analyst Laura Martin on December 23 maintained a Buy recommendation on fuboTV Inc. (NYSE:FUBO) but lowered the firm’s price target on the shares to $3 from $4.50. fuboTV Inc. (NYSE:FUBO) represents an inexpensive way for investors to participate in the U.S. consumer shift toward OTT and Streaming TV, the analyst told investors in a research note.
According to Insider Monkey’s third quarter database, 9 hedge funds were bullish on fuboTV Inc. (NYSE:FUBO), with collective stakes worth $21.6 million. Paul Marshall and Ian Wace’s Marshall Wace LLP is a significant position holder in the company, with nearly 3 million shares worth $10.5 million.
Like The Interpublic Group of Companies, Inc. (NYSE:IPG), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), fuboTV Inc. (NYSE:FUBO) is one of the top adtech stocks to invest in.
Here is what Bireme Capital specifically said about fuboTV Inc. (NYSE:FUBO) in its Q2 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. PubMatic, Inc. (NASDAQ:PUBM)
Number of Hedge Fund Holders: 12
PubMatic, Inc. (NASDAQ:PUBM) is a California-based company providing a cloud infrastructure platform that allows real-time programmatic advertising transactions for internet content creators and advertisers worldwide. On November 21, PubMatic, Inc. (NASDAQ:PUBM) announced that it has entered into a supply path optimization partnership with U.S. media agency Horizon Media. Horizon Media chose PubMatic, Inc. (NASDAQ:PUBM) as an exclusive partner to provide advertisers with data-driven advertising at scale. It is one of the best adtech stocks to buy now.
On December 15, Oppenheimer analyst Jason Helfstein maintained an Outperform rating on PubMatic, Inc. (NASDAQ:PUBM) but lowered the firm’s price target on the shares to $22 from $23 after refreshing his model to factor in higher headcount flowing through FY 2023, 3% to 5% cost of living increases, and the return of the 1Q Global Sales event, which trims his FY23 and FY24 EBITDA estimates by 7% and 6%, respectively.
According to Insider Monkey’s data, PubMatic, Inc. (NASDAQ:PUBM) was part of 12 hedge fund portfolios at the end of Q3 2022, with collective stakes worth $26.6 million, compared to 26 funds in the prior quarter worth $22 million. Jim Simons’ Renaissance Technologies held the biggest position in the company, comprising 754,100 shares worth $12.5 million.
8. Integral Ad Science Holding Corp. (NASDAQ:IAS)
Number of Hedge Fund Holders: 15
Integral Ad Science Holding Corp. (NASDAQ:IAS) is a New York-based digital advertising verification company operating in the United States, the United Kingdom, Germany, Italy, Spain, Sweden, Singapore, Australia, France, Japan, Canada, India, and Brazil. The company provides a cloud-based technology platform that offers actionable insights, independent measurement, and verification of digital advertising across different devices, channels, and formats. Integral Ad Science Holding Corp. (NASDAQ:IAS) is one of the best adtech stocks to invest in.
On December 15, Integral Ad Science Holding Corp. (NASDAQ:IAS) announced a first-to-market partnership with Gadsme, a premium in-game advertising platform. The partnership will allow Integral Ad Science Holding Corp. (NASDAQ:IAS) to verify Gadsme ad inventory worldwide and provide marketers with third-party viewability and invalid traffic measurement via the IAS Signal platform.
Jefferies analyst James Heaney on December 15 maintained a Buy rating on Integral Ad Science Holding Corp. (NASDAQ:IAS) with an unchanged $12 price target. In his view, the Street is “overly optimistic” on digital advertising growth in 2023 and 2024. However, he would buy Integral Ad Science Holding Corp. (NASDAQ:IAS) given its 50% valuation discount to closest peer DoubleVerify Holdings, Inc. (NYSE:DV) and what he sees as a “rich set of ’23 product catalysts.”
According to Insider Monkey’s data, 15 hedge funds were long Integral Ad Science Holding Corp. (NASDAQ:IAS) at the end of Q3 2022, compared to 12 funds in the prior quarter. Robert Smith’s Vista Equity Partners is the leading position holder in the company, with 94.3 million shares worth $683.3 million.
TimesSquare Capital made the following comment about Integral Ad Science Holding Corp. (NASDAQ:IAS) in its Q3 2022 investor letter:
“Offsetting that somewhat was the -27% showing from Integral Ad Science Holding Corp. (NASDAQ:IAS), which provides digital advertising verification services. Although revenues and earnings met expectations, management reduced its guidance for the rest of the year. Weakness from a potential recessionary environment may delay starting recent deals or otherwise elongate the sales cycle. We expect Integral to continue its strong growth path with healthy margins, so we added to our holdings.”
7. DoubleVerify Holdings, Inc. (NYSE:DV)
Number of Hedge Fund Holders: 15
DoubleVerify Holdings, Inc. (NYSE:DV) is a New York-based provider of software platforms for digital media measurement, data, and analytics in the United States and internationally. On November 8, DoubleVerify Holdings, Inc. (NYSE:DV) posted a Q3 GAAP EPS of $0.06 and a revenue of $112.3 million, outperforming Wall Street estimates $0.01 and $3.03 million, respectively. The company expects FY22 revenue of $450 million to $454 million, representing a year-over-year increase of 36% at the midpoint, while the consensus revenue came in at $449 million.
On October 18, Barclays analyst Raimo Lenschow maintained an Equal Weight rating on DoubleVerify Holdings, Inc. (NYSE:DV) and trimmed the price target on the shares to $26 from $27. The presently uncertain outlook favors cash flow positive and established software vendors, the analyst told investors in a research note.
According to Insider Monkey’s data, DoubleVerify Holdings, Inc. (NYSE:DV) was part of 15 hedge fund portfolios at the end of September 2022, compared to 12 funds in the prior quarter. Nancy Zevenbergen’s Zevenbergen Capital Investments is the biggest stakeholder of the company, with 2.16 million shares worth $59.2 million.
Here is what Artisan Partners specifically said about DoubleVerify Holdings, Inc. (NYSE:DV) in its Q2 2022 investor letter:
“DoubleVerify Holdings, Inc. (NYSE:DV) is the leading provider of data analytics that enable advertisers to increase the effectiveness, quality and return on their digital advertising investments. Instead of advertisers having to rely on each platform’s (Facebook, Twitter, Google, etc.) own unique metrics and manually trying to aggregate them into a cohesive reporting framework, DoubleVerify’s software accomplishes this in one single solution. It uses its own measurement and analytics across the advertising ecosystem, providing brands with consistency and standardization in measuring the efficacy of their digital advertising spend. This helps solve a critical problem for brands and ultimately helps drive their future ad buying decisions, which can be particularly difficult when >40% of digital ads are never seen,<5% receive more than two seconds of engagement and 15%-20% of impressions are fraud where bots emulate human views. We believe the company is well positioned to benefit from increased penetration of digital ad impressions in new channels and geographies, market share gains and upselling existing customers to more advanced and higher priced offerings.”
6. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 19
Magnite, Inc. (NASDAQ:MGNI) is a New York-based company that operates an independent sell-side advertising platform in the United States and internationally. The company’s platform allows advertisers to manage and monetize their ads. On November 9, Magnite, Inc. (NASDAQ:MGNI) reported a Q3 non-GAAP EPS of $0.18 and a revenue of $127.7 million, outperforming Wall Street estimates by $0.03 and $3.57 million, respectively.
On August 10, Susquehanna analyst Shyam Patil maintained a Positive rating on Magnite, Inc. (NASDAQ:MGNI) but lowered the price target on the shares to $13 from $24. The analyst said they posted a solid 2Q, with CTV topping expectations despite headwinds from the macro.
According to Insider Monkey’s data, 19 hedge funds were long Magnite, Inc. (NASDAQ:MGNI) at the end of Q3 2022, compared to 23 funds in the prior quarter. Brian Bares, Russell Mollen, and James Bradshaw’s Nine Ten Partners is a prominent stakeholder of the company, with more than 2 million shares worth $13.7 million.
Like The Interpublic Group of Companies, Inc. (NYSE:IPG), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), Magnite, Inc. (NASDAQ:MGNI) is one of the best adtech stocks according to 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 Best Adtech Stocks To Buy According To Hedge Funds is originally on Insider Monkey.
