In this piece, we will take a look at the 10 best advertising stocks to buy according to short sellers.
When compared to the copy driven model of the late 1900s as popularized by shows such as Mad Men, the advertising era of 2024 is completely different. Today, advertisers have at their disposal the data of billions of people which they can characterize according to preference and target their ads to. This growth in digital advertising has been driven by the rise of video streaming platforms and digital publications, which continue to gain market share over paper newspapers.
Nowhere else is the impact of digital advertising in today’s era clear as through the value of the world’s largest search engine company. A mega cap stock, this firm has a market value of a whopping $2 trillion, making it one of the largest companies in the world in terms of market value. Yet, in another case of 2024 being a historic year of shifts for the technology industry as evidenced by technologies such as artificial intelligence, this firm is also facing the heat from the US government which might end up changing the very fabric of the industry.
The search engine giant, which earned $187 billion in trailing twelve month revenue from search and advertising, traces its roots back to the late 1990s when its founders created an algorithm called PageRank. This software determined which webpages were authoritative based on the amount and quality of backlinks they got, and as the engine grew, so did the firm’s dominance in the global advertising industry as it processes more than 22 billion searches per day. However, this gravy train might be ending as a Washington judge ruled in August that its $26 billion in payments to other firms to make the platform the default option on their devices was an anti competitive behavior that locked others out in the industry.
Following the ruling, there are rumors that the Justice Department might be considering breaking the company up by making it divest its mobile software and web browsing business divisions. However, any such decision will require court approval which will force the firm to comply. And while a court victory is great for news headlines, the US government has rarely broken up large companies in the modern era. The last such case was in 1982 through the breakup of the Bell System, and even if the browser and OS were made separate businesses, they are unlikely to survive on their own since both are provided to users for free.
Not to mention, the long drawn nature of anti-trust action could take years, and end up being enforced when the industry is vastly different from what it is now. This is because artificial intelligence is gnawing at the heels of the industry, with products such as OpenAI’s SearchGPT already in early stage releases. Speaking of AI, it’s also making its mark on the advertising industry. Just as advertisers are able to rely on millions of users’ data through search and social media platforms, AI helps them navigate through this data in novel and new ways.
As per McKinsey, marketing and sales could see a $931 billion productivity boost from AI through new features such as personalized campaigns and improved data use. These use cases have already become apparent, with the largest social media company in the world regularly sharing updates about how it is using AI to make advertisers’ jobs easier on its platform. Two tools that it offers are the Advantage+ and Advantage+ Shopping platform which enables advertisers and sellers to automate their campaign operations and determine the best advertisements to run. The platforms also appear to be driving results, with the firm quoting a study that is “demonstrating 22% higher return on ad spend for US advertisers after they adopted Advantage+ Shopping campaigns” with revenue for the firm through the two AI platforms doubling annually during Q1 2024.
Speaking of revenue, the advertising industry’s spending, which determines the fate of publishers is also determined by the state of the economy, consumer confidence, and advertisers’ outlook. One such firm with brands in more than 100 companies shared during its Q2 2024 earnings call that while the advertising market is not at its best right now, it does appear to be recovering. This recovery is taking place in areas such as food and technology which joins strong performance in healthcare, pharmaceuticals, and beauty care. Another publisher, which is one of the most well known digital media and lifestyle platforms in the world that relies on programmatic advertising (data driven user targeting through ads), saw its programmatic revenue grow by 3% annually during Q2 even as broader advertising revenue dropped by 19% annually.
With these details in mind let’s take a look at which advertising stocks to buy according to short sellers. For stocks that are driving advertising technology, you should check out 8 Best AdTech Stocks to Buy Now.
A marketing manager looking at the data dashboard of a marketing automation software showing successful campaign results.
Our Methodology
To make our list of the best advertising stocks to buy according to short sellers, we listed the NASDAQ and NYSE listings of an advertising ETF by the percentage of shares outstanding that were sold short and selected the stocks with the lowest percentage. An added 23 stocks after an internet search were also analyzed, but all these had market caps below $300 million so they were excluded.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10. The Trade Desk, Inc. (NASDAQ:TTD)
Short Interest as % of Shares Outstanding: 2%
Number of Hedge Fund Investors In Q2 2024: 46
The Trade Desk, Inc. (NASDAQ:TTD) is an advertising technology company that provides advertisers with a unified service to run their ads on different platforms. Its platform supports social media and streaming devices as well, which places The Trade Desk, Inc. (NASDAQ:TTD) favorably to capture two of the fastest growing media platforms in the world. Additionally, programmatic advertising, the fastest growing advertising market with an estimated compounded annual growth rate (CAGR) of 22.8% also provides key tailwinds and opportunities to The Trade Desk, Inc. (NASDAQ:TTD) especially due to its strong market position. The firm counts several sizeable companies, like HP as its customers, and its programmatic advertising platform UID2 allows businesses to run ads on Disney+ and Hulu. The Trade Desk, Inc. (NASDAQ:TTD)’s significant exposure to the streaming industry can provide it with key growth moving forward, provided it does not suffer from macroeconomic uncertainty.
Rowan Street Capital mentioned The Trade Desk, Inc. (NASDAQ:TTD) in its Q1 2024 investor letter. Here is what the firm said:
“We bought TTD stock exactly 4 years ago at an average cost of $17.40 (split-adjusted). Since our purchase we have made 5x on our original investment, translating to ~50% annualized return. But it’s our journey to the 5-bagger return that is most interesting here. About 1.5 years following our purchase, the stock had skyrocketed to the highs of $107 in November 2021 as NASDAQ peaked. At the time we knew very well that the stock was overvalued and had gotten ahead of itself. After all, this was a 6-bagger in just 1.5 years, so the conventional wisdom would suggest to bag your prots. “You don’t go broke taking a prot” they say, which is the biggest lie on Wall Street in our opinion.
However, we decided to keep the stock, knowing that it will likely experience a correction sometime in the near future. And here is our rational… First of all, we had gotten to know Trade Desk and its management team relatively well during our 1.5 years of ownership. We were convinced that we had stumbled upon a great business with excellent long-term growth prospects. We were fortunate to establish a position at an attractive price as this stock has always been very expensive. If we were to bag our prots at the time, no one would criticize a 6x return over the course of 1.5 years. But… what would we do with the cash proceeds? First, our investors would be faced with a capital gain tax bill at the end of the year. Would we sit there in hopes that we can buy it back at a lower price? And if it dropped, would we have bought it back? Our experience has taught us that it sounds nice in theory but very unlikely in practice! Could we have avoided a setback? Yes, but who could be sure we would return to the stock in time before an important rally (close to impossible and not what we are good at). So 5x in 1.5 years is very nice, but 5x in 4 years as of now is still an amazing return. And… we still own a great business that will likely do well over time and we didn’t take all that capital and plow it into something we don’t know very well or is likely a mistake. There are not a lot of TTDs around! Truly exceptional companies are rare and our job is to buy right and to hold on!”
9. HubSpot, Inc. (NYSE:HUBS)
Short Interest as % of Shares Outstanding: 1.69%
Number of Hedge Fund Investors In Q2 2024: 80
HubSpot, Inc. (NYSE:HUBS) is a cloud computing company that offers marketing and sales products through its Sales Hub and Marketing Hub platforms. It is one of the companies in the market that is offering AI and machine learning features to its marketing and sales customers. HubSpot, Inc. (NYSE:HUBS)’s new AI features, 70 of which were announced earlier this year, enable brand management for marketers such as allowing them to use a singular theme for their campaigns. Machine learning features are offered as part of the Marketing Hub, and like its peers in the cloud computing and SaaS industry, HubSpot, Inc. (NYSE:HUBS)’s revenue is vulnerable to economic downturns which slow down business spending. However, its size and customer base (HubSpot, Inc. (NYSE:HUBS) had 228,000 customers as of Q2 end) means that the firm benefits from deep industry partnerships that allow it to position itself for an economic recovery.
HubSpot, Inc. (NYSE:HUBS)’s management shared key details for its marketing platform during the Q2 2024 earnings call:
“Overall, we continue to have high conviction that the pricing change is the right decision for our customers and therefore, for HubSpot. To round out Q2, let’s talk about the innovation we drove with our Spring Spotlight product launches and how they’re driving momentum. In April, as part of our first Spring Spotlight, we introduced major updates to Service Hub and launched Content Hub. The Service Hub update was a big unlock. It now supports both customer support and customer success teams on a single unified platform. We saw the number of wins with 100-plus service seats grew 55% year-over-year and 30% year-to-date. In addition, we saw a 200% increase in portals closing ticket in help desk since the relaunch. In terms of Content Hub, our goal is to provide an AI-powered content marketing solution that can help marketeers create and manage content.
And the response has been fantastic. The attach rate for Content Hub to Marketing Hub has tripled since the launch and is now nearly 50% for new marketing hub wins. This high attach rate is being driven by innovative AI features like content remix, AI blogs and brand voice. Brands like Tripadvisor, World Widelife Fund for Nature and Morehouse College, are all using HubSpot content solutions to grow. Overall, we’re thrilled to see our product innovation drive value for our customers.”
8. Salesforce, Inc. (NYSE:CRM)
Short Interest as % of Shares Outstanding: 1.41%
Number of Hedge Fund Investors In Q2 2024: 117
Salesforce, Inc. (NYSE:CRM) is another cloud computing company that allows businesses to manage their marketing campaigns across stores, web, social, and other platforms. With more than 70,000 employees and $35.7 billion in trailing twelve month revenue, Salesforce, Inc. (NYSE:CRM) is one of the biggest players in its industry. This means that unlike smaller SaaS and cloud companies, its story focuses more on customer retention and cost control as opposed to the growth based valuation for other firms. Its primary marketing platform is the Marketing Cloud, and Salesforce, Inc. (NYSE:CRM) plans to further improve this service through AI via its platform called Data Cloud. Data Cloud relies on more than 8 trillion records to streamline customer experience and provide Salesforce, Inc. (NYSE:CRM) with a unique leg up over competitors. However, despite its scale, a key weakness of the firm is its inability to land deals with large customers, and the stock could face headwinds on this front later on.
Salesforce, Inc. (NYSE:CRM)’s management shared details for its marketing features during the Q1 2025 earnings call:
“Let me give you just one example of a company that is using Salesforce across the entire front office. CrowdStrike, a leading cybersecurity company and a longtime customer of Salesforce added Data Cloud, Marketing Cloud, Commerce Cloud, Revenue Cloud and MuleSoft in the quarter. CrowdStike already relied on Einstein 1 sales and service and Slack, and now they’ll use Data Cloud to pull together new and trap data from data lakes to build a 360 degree view of their customers, helping them align sales and marketing efforts to drive growth. They’re also leveraging MuleSoft with incredible results. MuleSoft has helped CrowdStrike accelerate project delivery by 30% and decreased maintenance costs by 20%. Salesforce is now the backbone of CrowdStrike driving every aspect of CrowdStrike’s operation and limiting the reliance on complex siloed third party applications.”
7. Pegasystems Inc. (NASDAQ:PEGA)
Short Interest as % of Shares Outstanding: 1.37%
Number of Hedge Fund Investors In Q2 2024: 27
Pegasystems Inc. (NASDAQ:PEGA) is an enterprise support software company that allows businesses to acquire customers and manage customer experiences. When compared to some other advertising stocks on our list, it is a relatively smaller company despite having been set up in 1983, and as is characteristic with high growth cloud stocks, Pegasystems Inc. (NASDAQ:PEGA) is only sporadically profitable. This means that investors are hyper focused on its revenue growth and margins, with the share price contingent on these two metrics. As a smaller company, Pegasystems Inc. (NASDAQ:PEGA) can benefit from quickly shifting its strategies to meet emerging trends, and it appears to be doing so with its Blueprint platform. Blueprint allows Pegasystems Inc. (NASDAQ:PEGA)’s customers to use AI to generate different digital transformation strategies, and it sets its enterprise software apart from customers who are primarily focused on enabling businesses to write code and generate software.
Pegasystems Inc. (NASDAQ:PEGA)’s management shared key details for Blueprint during the Q2 2024 earnings call:
“Client discussions I’ve had since launch of Blueprint are some of the most positive I’ve had in the Pega 40-year history.
In fact, when our clients see what we delivered they quickly recognized for power and the opportunities. I believe that the energy and confidence in our vision is increasing — and is helping to drive the kind of results we’re talking about today. With tens of thousands of Pega Blueprints created over the last few months, we’re identifying opportunities to accelerate growth and creating additional momentum for Pega Cloud, which will contribute to monetization. And we’ve barely scratched the surface of what we, our clients, and our partners can do with this game-changing technology, and we’re really energized by this. I do believe that Blueprint is fundamentally changing how we engage, sell and deliver with our clients.”
6. Atlassian Corporation (NASDAQ:TEAM)
Short Interest as % of Shares Outstanding: 1.19%
Number of Hedge Fund Investors In Q2 2024: 47
Atlassian Corporation (NASDAQ:TEAM) is an enterprise software company that is known for its Jira software which also enables customers to manage marketing requests, create templates, and run market projects. A sizeable company with $4.4 billion in revenue, Atlassian Corporation (NASDAQ:TEAM)’s narrative depends on its ability to further drive growth, control margins, and target customers of all sizes. Any weakness on this front, which means that Atlassian Corporation (NASDAQ:TEAM) has to meet revenue growth expectations and not just simply grow introduces weakness in the share price. This has also translated into weak share price performance in 2024, as Atlassian Corporation (NASDAQ:TEAM)’s stock is down by 31% year to date. The firm has to also perform on all fronts, namely its Data Center and Cloud divisions especially since they are placed in the highest growing segments of the software industry. Atlassian Corporation (NASDAQ:TEAM) is also currently migrating its customers from the Server business to the two aforementioned businesses, and its performance could improve after things stability.
Artisan Partners mentioned Atlassian Corporation (NASDAQ:TEAM) in its Q1 2024 investor letter. Here is what the firm said:
“Among our top detractors were Atlassian, ON Semiconductor and Exact Sciences. Atlassian’s earnings results met expectations for cloud revenue growth. However, this was insufficient for investors to support the stock’s momentum after strong recent performance. While parts of its cloud business, such as enterprise, are exceeding expectations, there are signs of weakness among small- and medium- sized companies, where pressures persist in paid seat expansions. We trimmed the position due to valuation concerns; however, we remain bullish in the longer term and are building conviction around its ability to leverage generative AI to drive accelerated cloud revenue growth.”
5. Adobe Inc. (NASDAQ:ADBE)
Short Interest as % of Shares Outstanding: 1.14%
Number of Hedge Fund Investors In Q2 2024: 107
Adobe Inc. (NASDAQ:ADBE) is one of the biggest enterprise software companies in the world. It offers advertising services through its Advertising and Publishing business. It enables businesses to manage their marketing campaigns across different platforms such as search and social, conduct real time bidding, optimize metrics, run campaigns, and run programmatic advertising for up and coming mediums such as connected televisions. Adobe Inc. (NASDAQ:ADBE)’s key business strength lies in its ability to generate subscriptions, which allows it to earn stable annual recurring revenue. ARR is a key valuation metric for SaaS firms, and for Adobe Inc. (NASDAQ:ADBE), its scale makes it quite important for it to show investors results from artificial intelligence features. This is because any weakness on this front can create a perception among investors that the firm has lost its technological edge and is vulnerable to losing market share to competitors and upstarts. Fortunately for Adobe Inc. (NASDAQ:ADBE), instead of launching new AI products, it has to only promote AI features to its users to create demand.
Polen Capital mentioned Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter. Here is what the firm said:
“With Adobe, in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
4. Meta Platforms, Inc. (NASDAQ:META)
Short Interest as % of Shares Outstanding: 1.1%
Number of Hedge Fund Investors In Q2 2024: 219
Meta Platforms, Inc. (NASDAQ:META) is one of the biggest social media companies in the world. It is also the social media firm mentioned in our introduction, and its user base of roughly 3.79 billion people means that without Meta Platforms, Inc. (NASDAQ:META), the advertising industry significantly shrinks. The firm offers a variety of products to two kinds of advertisers on its platform. These cater to advertising firms that are running campaigns for big businesses and small and medium businesses that rely on platforms such as the Facebook Marketplace. In the fiercely competitive AI race among big tech, a large chunk of Meta Platforms, Inc. (NASDAQ:META)’s hypothesis depends on its ability to monetize AI and use the technologies to improve user experience and create new products for advertisers. This is in addition to the firm’s ability to retain social media users amidst trend shifts among Gen Z.
Polen Capital mentioned Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter. Here is what the firm said:
“Meta Platforms delivered robust results in the period, with revenue growth accelerating in the first quarter. However, revenue comparisons for Meta will become more difficult from here, and its guidance for 2Q revenue fell below market expectations. After the company’s “year of efficiency,” where it cut costs in its core business, management is now indicating another ramp-up in GenAI and metaverse spending, spurring concerns about future profit margins. Metaverse spending, by our calculations, is now over $20 billion per year with little to no expected return on the foreseeable horizon.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Short Interest as % of Shares Outstanding: 0.68%
Number of Hedge Fund Investors In Q2 2024: 308
Amazon.com, Inc. (NASDAQ:AMZN) is one of the biggest eCommerce companies in the world, which also makes it a key player in the advertising industry. This is because Amazon.com, Inc. (NASDAQ:AMZN)’s eCommerce site which attracted 3.25 billion users in June according to SemRush, creates a golden goose of users for large and small businesses to target. Amazon.com, Inc. (NASDAQ:AMZN) helps its sellers to run marketing campaigns through the Amazon Ads platform. Some features under this include cost per click (CPC) ads for sponsored brands, products, and displays. Amazon.com, Inc. (NASDAQ:AMZN) also operates in the SaaS advertising industry through its AWS business which allows customers to run advanced marketing analytics and manage customer experiences. As a whole, Amazon.com, Inc. (NASDAQ:AMZN)’s hypothesis depends on its ability to optimize its fulfillment networks, increase same day deliveries, leverage AI in its business and in AWS product offerings, and the broader economic health.
Patient Capital Management mentioned Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter. Here is what the firm said:
“Amazon.com Inc. (AMZN) moved higher throughout the second quarter as AI demand helped to reaccelerate growth in their AWS business. It looks as though the cloud business is finally past the customer cost optimization period with customers restarting their cloud migrations as well as expanding spend on AI projects. Despite the top and bottom-line improvement seen in the first quarter, the company is significantly underearning its long-term potential as it continues to reinvest aggressively in the business. With 80% of global retail sales still being done in physical stores and 85% of global IT spending still on-premises, we see a long-run way for the dominant player in the cloud, retail, and increasingly logistics and advertising space.”
2. Alphabet Inc. (NASDAQ:GOOG)
Short Interest as % of Shares Outstanding: 0.33%
Number of Hedge Fund Investors In Q2 2024: 165
Alphabet Inc. (NASDAQ:GOOG) is the world’s largest social media operator and one of the biggest players in the digital advertising industry. Its advertising business allows businesses to place ads on Google’s different platforms, such as its search engine, and on websites that partner up with it. Alphabet Inc. (NASDAQ:GOOG) also allows its advertising customers to customize their campaigns by targeting keyword based searches. While estimates show that the firm commands more than 50% of the search based advertising market, research shows that the general purpose nature of Google’s search engine is hurting it as businesses choose to divert their spending to custom search platforms like Amazon.com, Inc.’s Amazon website. Additionally, Alphabet Inc. (NASDAQ:GOOG) is also facing a lot of regulatory headwinds with reports suggesting that the Justice Department might break it up. Even still, this might not be its biggest problem, as the firm might struggle if OpenAI or another firm offers a superior web search product that uses AI to enhance user experience.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter. Here is what the firm said:
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
1. Nexxen International Ltd. (NASDAQ:NEXN)
Short Interest as % of Shares Outstanding: 0.08%
Number of Hedge Fund Investors In Q2 2024: 4
Nexxen International Ltd. (NASDAQ:NEXN) is an Israeli company that allows advertisers to buy ads and publishers to sell them. It operates demand and supply side platforms that enable publishers to work with advertisers and manage their ad inventory. Essentially, Nexxen International Ltd. (NASDAQ:NEXN)’s business is similar to Google’s ad business for firms that operate in Israel. This creates tailwinds and headwinds for the firm. On the former front, Nexxen International Ltd. (NASDAQ:NEXN) is targeting the emerging connected TV market which is growing in popularity among users. This provides it with a large potential market that it can grow comfortably in provided it captures an early share. However, on the latter front, a reliance on connected TV means that any weakness in this industry can hit Nexxen International Ltd. (NASDAQ:NEXN) hard due to a lack of business diversification.
NEXT is an advertisement stock with low short interest percentage. But our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NEXN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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