In this article, we will look at the 10 Worst Advertising Stocks To Buy According to Short Sellers.
Overview of the Global Advertising Sector
Advertising agencies have profited from per capita disposable income, increasing consumer spending, and corporate profit in the past few years. Although advertising expenditure fell after the outbreak of the COVID-19 pandemic, industry revenue in 2020 rose with companies demanding creative services for their pandemic-focused promotional campaigns. Corporate profit bounced back after 2020, allowing agencies to monetize the exponential release of pent-up demand as companies and businesses scrambled to target a specific customer base: one with increasing disposable income.
According to estimates from IBISWorld, industry-wide revenue in the advertising sector has been growing at a compound annual growth rate of 2.7% over the past five years. It is expected to reach $70.1 billion by 2024, increasing by 1.9%. Profit is also anticipated to grow by 6.6%. According to a report by Mordor Intelligence, the online advertising market is valued at $257.97 billion as of 2024. It is expected to increase to $431.76 billion by 2029, growing at a compound annual growth rate of 10.97% in the forecast period.
North America is the largest market in the sector and is also the fastest-growing in the world. The increasing use of digital devices and social media has caused an exponential boom in the online advertisement sector, becoming a critical component of marketing strategies for companies across the globe.
Spending in the Advertising Sector
Spending in the advertising industry, which determines the fate of publishers, is also determined by the state of the economy, consumer confidence, and advertisers’ outlook. Advertising giants have talked during earnings calls 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. Companies that are active in programmatic advertising (data-driven user targeting through ads), have also seen programmatic revenues surge while broader advertising revenue decline.
US Elections and the Advertising Industry
US political campaigns take over the advertising landscape during an election season, setting the stage for a number of challenges for non-political advertisers. As such challenges only seem to grow with each election cycle, 2024 is no exception. Hotly contested Senate battles and a divisive Presidential race landscape are some of the factors driving unprecedented political ad spend. Estimates show that this year’s political ad spending is expected to stand between $10.2 billion and $12 billion. This translates to a 13%-30% increase from the 2019-2020 election cycle ad spend.
This creates a pressing need for advertising and marketing leaders from outside the political landscape to find creative ways to navigate the politics-saturated market and chalk out ways to make the most of their spending in a period of localized inventory scarcity and high demand. Advancements in generative AI are also likely to create a landscape of misinformation and disinformation, especially on social media. This brings an additional responsibility to advertisers to safeguard their brands and clients from the potential pitfalls of such AI-generated misinformation and harmful political content.
According to a report by Insider Intelligence, TV media is again expected to take the largest chunk of America’s political ad spending. It is anticipated to rise 7.9%, accounting for 71.9% of all spending. In addition, advertising costs on TV and other mediums are also expected to rise with the presidential campaign reaching its full swing. These trends will likely affect all kinds of advertisers, as TV, radio, and out-of-home advertising is anticipated to be rife with election advertising. This would make getting non-political messages across considerably harder, as there is expected to be considerable noise in the market between August and November.
With these trends in mind, let’s examine the 10 worst advertising stocks to buy according to short sellers.
Photo by Joshua Earle on Unsplash
Our Methodology
To list the 10 Worst Advertising Stocks to Buy According to Short Sellers, we used a Finviz screener to filter out stocks catering to the advertising industry. Next, we narrowed our list of stocks by selecting the ones having high short interest. Finally, the stocks were ranked in ascending order of their short interest. We also mentioned the hedge fund sentiment for each stock.
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 Worst Advertising Stocks To Buy According to Short Sellers
10. Haoxi Health Technology Ltd (NASDAQ:HAO)
Short Interest: 1.41%
Number of Hedge Fund Holders: 31
Haoxi Health Technology (NASDAQ:HAO) is an online marketing solutions company based in China. Its primary business is providing one-stop advertising marketing solutions through its media partners, such as online short video advertisements. Its specializations include the planning, production, placement, and optimization of online advertisements. The company’s cooperative media partners include authorized third-party agency media and media platforms such as TikTok and Toutiao. Essentially, the company provides its advertising services to customers and companies in the healthcare sector. However, it also conducts business with organizations and businesses in the domestic market.
Haoxi Health Technology (NASDAQ:HAO) holds considerable market experience in the online marketing industry, giving it a competitive advantage and establishing it for enhanced financial performance. It recently entered into a Framework Contract for Cooperation on Information Placement on Media Platforms with Wuhan Yiya Simei Dental Clinic Co., Ltd., a regional dentistry chain in China. This collaboration occurred through Haoxi Health Technology’s wholly owned subsidiary, Beijing Haoxi Digital Technology Co. Ltd. The partnership is furthering the company’s objective of delivering internet marketing solutions. As per the contract, Beijing Haoxi will provide elaborate advertising services to Yiya Dental through popular social media platforms such as Douyin, Toutiao, and Xigua Video. This includes various media forms, including text, images, short videos, flash, and even mobile app content.
In further efforts to expand its customer base and establish itself as a leader in the sector, the company entered a Bidding Data Promotion Rebate Agreement with Jinan Yanling Biotechnology Co., Ltd. and its subsidiaries and affiliated companies, which are collectively known as “Yanling.” This collaboration also took place through Haoxi Health Technology’s wholly-owned subsidiary, Beijing Haoxi Digital Technology Co. Ltd. As per the agreement, Beijing Haoxi will provide elaborate promotion and advertising services to Yanling through advertising platforms such as Douyin, Jinri Toutiao, and Xigua Video. 31 hedge funds hold stakes in the stock as of Q2 2024. It ranks tenth on our list of the 10 worst advertising stocks to buy, according to short sellers.
9. Integral Ad Science Holding Corp. (NASDAQ:IAS)
Short Interest: 3.63%
Number of Hedge Fund Holders: 23
Integral Ad Science Holding Corp (NASDAQ:IAS) is a global media measurement and optimization platform. It takes the ninth spot on our list of the 10 worst advertising stocks to buy, according to short sellers. Its cloud-based technology platform offers practical insights and independent verification and measurment of digital advertising across all channels, devices, and formats, including mobile, desktop, connected TV, display, video, and social.
Its Quality Impressions metric is designed to ascertain that digital ads are served to a real person instead of a bot, appear in a suitable and brand-safe environment, are viewable on-screen, and are displayed in the right geography. These checks help advertisers optimize their ad spend and ensure they can measure consumer engagement across platforms more efficiently. In addition, it allows publishers to enhance their revenue and inventory yield. It boasts integrations with key tech and advertising platforms, including Instagram, Facebook, YouTube, Google, and several others. Integral Ad Science Holding Corp operates in the United States, the United Kingdom, Germany, France, and other countries.
The company has several business growth drivers that help it stay on track with its growth progress. These include new and enhanced partnerships, key global customer wins, a strong product pipeline, and the opportunity to support digital logo wins after Oracle announced its exit from the advertising business.
Integral Ad Science Holding Corp’s (NASDAQ:IAS) total revenue in Q2 2024 grew by 14%, reaching $129 million and surpassing its previous outlook of a range between $125 million and $127 million. It also reported double digital growth across all its businesses in Q2, with 17% measurement growth, 11% optimization growth, and 12% publisher growth. International revenue for the company has been increasing faster than overall revenue for the third consecutive quarter, highlighting its global standing. This trend was driven by the adoption of strong social media offerings.
The company recently had two major global brands wins in the significant telecommunications vertical: Orange and Telefonica. Orange is the largest telecommunication provider in France. It selected Integral Ad Science Holding Corp (NASDAQ:IAS) as its new partner, primarily because of the company’s quality of service and differentiated products. Telefonica, a Spain-based multinational company, also selected Integral Ad Science Holding Corp (NASDAQ:IAS) as one of its global strategic partners. This partnership is set to extend to both optimization and measurement solutions.
According to its advertiser customer data, the company has seen a 55% increase in average annual spending in year 2 of new contracts since 2019. The stock is trading at a forward P/E of 10.95, an 18.90% discount to its sector. Its current price target of $31.20 implies an upside of 5.77% from current levels.
TimesSquare Capital U.S. Small Cap Growth Strategy stated the following regarding Integral Ad Science Holding Corp. (NASDAQ:IAS) in its first quarter 2024 investor letter:
“For the Communication Services sector, we generally prefer to invest in media and services companies that are either well placed from an advertising perspective with a target audience or provide differentiated services. Integral Ad Science Holding Corp. (NASDAQ:IAS) provides digital advertising verification services. The company reported a decent fourth quarter, with beats to sales and profit estimates. However, initial 2024 guidance was disappointing to investors, and the stock retreated by -31%. Management disclosed they are offering more competitive pricing to strategic accounts. While near-term revenues will be impacted, they believe there are significant up-sell and cross-sell opportunities among this cohort.”
8. Stagwell, Inc. (NASDAQ:STGW)
Short Interest: 5.38%
Number of Hedge Fund Holders: 9
Stagwell Inc. (NASDAQ:STGW) is a digital-first global marketing company specializing in performance media and data, digital transformation, creativity and communications, and consumer insights and strategy. The company’s Brand Performance Network segment encompasses creative media consulting, unified media and data management structure with omnichannel media placement, and business-to-business marketing capabilities. The Communications Network, in contrast, covers a network offering strategic corporate communications, advocacy, public relations, investor relations, online fundraising, and other services to political and advocacy organizations and corporations.
Stagwell (NASDAQ:STGW) also specializes in digital storytelling, multi-cultural marketing, cultural relevance, and influencer integration. The company’s financial results for the first half of 2024 have put it in a solid position to exceed or make guidance for the year, strengthening its position for H2. Its strong financials have dramatically altered Stagwell’s industry standing, with consultants and industry leaders beginning to see it in a different light. Over the past months, it has received many more opportunities in the $10 million+ range. To put this into perspective, the company had one such opportunity last year. This year, it had 11.
The net new business in Q2 2024 reached $113 million, a record for the company. The Creative win of Cadillac and Chevy from General Motors was the most significant in the company’s history. Apart from General Motors, the company also managed major wins with Macy’s, Target, Delta Airlines, and Zales in Q2 2024. These wins are expected to continue in Q3, including Ferrero and Anomaly, making an extra $50 million in wins.
Revenue in Q2 reached $671 million with a 6% growth. This growth was led by a 42% growth in Advocacy, 9% growth in Creativity and Communications, 5% in Performance Media and Data, and 13% in Stagwell Marketing Cloud. Digital Transformation also grew by 2%. However, with demand from technology companies increasing as more AI projects come in, the company is confident in achieving double-digit growth.
Apart from acquiring companies, the company is also making considerable investments in growth and internal development. It spent an additional $10 million on new business pitches, travel and entertainment, its Cannes experience, and other one-time compensation expenses. Overall, it is spending around $20 million on these growth initiatives in a quarter, which are paying off with the new larger wins and growth in the Stagwell Marketing Cloud. On average, Stagwell’s (NASDAQ:STGW) top 25 clients are now spending around $24 million per annum with the company.
Choice Equities Capital Management made the following comment about Stagwell Inc. (NASDAQ:STGW) in its second quarter 2023 investor letter:
“Stagwell Inc. (NASDAQ:STGW) – Stagwell is another company likely to benefit from a potential increase in advertising budget spending. The company can most succinctly be described as a digitally savvy marketing agency. CEO Mark Penn has built the company through acquisition, starting with the first major platform acquired, which was media agency MDC Partners in 2019. With roots tracing to Penn’s experience in running polling agencies, Penn has pieced the business together through acquisition, with a focus on adding entities with targeted digital capabilities to help their clients succeed in the digital transformations of their marketing functions. The company counts Apple, Google, Amazon and Microsoft amongst its customers. As a relatively new entity, the agency is devoid of many of the low-growth business elements its older legacy-oriented peers encounter with their exposures to decaying media verticals.
Shares look attractively priced, trading at a single-digit PE multiple and offering a mid-teens free cash flow yield. The company has a highly cash generative model, offers attractive topline organic growth that is likely moving into the mid-teens going forward on the back of digital tailwinds and a ramp in political spending. Additionally, recent share repurchases have cleaned up the cap table, shrunk the float and should make the story easier to understand for investors who still may be unfamiliar with the name.”
7. Deluxe Corporation (NYSE:DLX)
Short Interest: 5.48%
Number of Hedge Fund Holders: 18
Deluxe Corporation (NYSE:DLX) is a data and payment company specializing in Data Solutions, B2B payments, Merchant Services, and Print. The Data Solutions segment provides data-driven marketing solutions, such as digital engagement, business incorporation services, financial institution profitability reporting, and account-switching tools. The Print segment encompasses business and personal checks, printed business forms, promotional products, and business accessories.
The company’s Merchant Services segment offers debit and credit card authorization and payment systems and processing services. Its customer base typically extends to small and medium-sized retail and service businesses. Furthermore, the B2B Payments segment provides treasury management solutions. These include remote deposit capture, remittance and lockbox processing, receivables management, paperless treasury management, fraud and security services, and the Deluxe Payment Exchange.
Deluxe Corporation (NYSE:DLX) runs on strong fundamentals, with solid operating cash flows and expected sequential growth. These results reflect the company’s strong execution across North Star operating plan initiatives and core capital allocation priorities. Such efforts highlight the development of the company’s key profitability metrics and shed light on its ability to expand earnings consistently faster than revenue.
In the first half of 2024, the company recorded revenue growth rates of 13% and 8% year over year in its Data Solutions and Merchant Services segments, respectively. Like Q1 2024, it is making meaningful progress across all 12 North Star work streams. Around two-thirds of its growth initiatives are now in the execution phase, with benefit realization expected to be reflected in the second half of 2024 and throughout 2025.
A prominent indicator of the company’s North Star progress is the continuing decline in corporate segment expense as a percent of the total revenue. Deluxe Corporation (NYSE:DLX) is also undertaking efforts to improve the marketing effectiveness of the workstream. It consolidated all of its six brands acquired as a part of the First American into Deluxe Merchant Services, one unified brand. This step is expected to improve the company’s marketing performance and efficiency. Moreover, the consolidation will simplify One Deluxe’s success in driving cross-selling.
Deluxe Corporation’s (NYSE:DLX) growth and improvement initiatives lend it a strong competitive edge in the market. The stock is trading at a forward P/E of 6.29 at a 68.06% discount to its sector. Its current price target of $20.05 implies an upside of 49.63%. It ranks seventh on our list of the worst advertising stocks to buy, according to short sellers.
6. Omnicom Group, Inc. (NYSE:OMC)
Short Interest: 5.93%
Number of Hedge Fund Holders: N/A
Omnicom Group (NYSE:OMC) is a global marketing and corporate communications company. Its specialty firms and branded networks offer services in various arenas, including advertising, prevision marketing, strategic media planning and buying, commerce and branding, customer relationship marketing (CRM), healthcare marketing, public relations, and other specialty communications services. These services span more than 70 countries and around 5,000 clients.
Omnicom Group (NYSE:OMC) specializes in digital and direct marketing and post-production services, database management, digital transformation consulting, custom publishing, crisis communications, package design, interactive and mobile marketing, promotional marketing, public affairs, social media marketing, retail media and e-commerce, search engine marketing, instore design, interactive and mobile marketing, investor relations, and a number of other services. It also operates Flywheel Digital as its digital commerce, offering services in media execution, e-commerce operations, and market intelligence.
The company is running on strong financials. It recorded a 5.2% organic growth rate for Q2 2024, with its US segment growing at a 6.3% rate across all disciplines, including Experiential and Advertising and media. Its first-half and Q2 2024 financial results maintained its full-year organic revenue growth target of between 4% and 5%, highlighting its continued profitability. Omnicom Group made substantial progress across several areas in Q2.
Omnicom Group (NYSE:OMC) expanded its end-to-end generative AI solution, launched a new production practice area, landed several prominent clients, and expanded its e-commerce offerings. It launched Omni 3.0, the next generation of AI-powered Omni, at Cannes last year. This year, the company is seeing tools and partnerships being activated through each of its business areas through this generative AI platform. These areas of growth range from creative to media, precision marketing, and production.
One example of these advancements is the launch of collective AI by TBWA, offering its clients an array of AI tools. Collective AI expedites and automates basic tasks, offers AI-driven insights to clients, and frees up time for teams to help brands manage their services, products, and experiences. It is powered by Omni’s first-mover generative AI partnership and includes custom applications using TBWA’s elaborate archives and LLMs.
Another prominent example is the launch of ArtBotAI, an intelligent content orchestration platform. ArtBotAI leverages models powered by Omni, assembling its clients’ digital assets to create and deliver personalized experiences. It enhances the value of its clients’ creative content, maximizing the performance and precision of their media investments. Such developments shed light on the profitability and efficiency of the company’s generative AI strategy, providing tools and capabilities to streamline processes and drive transformative outcomes for its clients.
The company has continued its strategic expansion strategies throughout the quarter, growing its market-leading e-commerce capabilities and retail media. At Cannes, it announced a collaboration with Amazon Ads, enabling its media teams to access Amazon’s shopping, browning, and streaming insights to directly tie CTV and linear investments to purchases made on Amazon. The stock trades at a forward P/E of 12.61 at a 6.57% discount to its sector.
5. National CineMedia, Inc. (NASDAQ:NCMI)
Short Interest: 6.10%
Number of Hedge Fund Holders: 12
National CineMedia (NASDAQ:NCMI) is a media company operating in the cinema advertising sector in the United States. It comprises over 18,400 screens in around 14,400 theatres nationwide in 190 Designated Market Areas. The company presents several formats of The Noovie Show, depending upon its theatre circuit of operation. This includes Post-Showtime advertising inventory after the advertised showtime, and the selling of advertising on its LEN, a series of screens in movie theatre lobbies.
In addition, the platform also undertakes other forms of promotions and advertisements in theatre lobbies, including selling mobile and digital online advertising through its Audience Accelerator. The Audience Accelerator works across various Noovie digital properties and complementary out-of-home venues, including convenience stores, restaurants, and even college campuses.
The cinema industry as a whole thrived in Q2 2024 as the public entered into the summer. The box office landed $1.9 billion, primarily due to the release of widely popular and highly anticipated releases such as Inside Out 2, Bad Boys: Ride or Die, and Kingdom of the Planet of the Apes. National CineMedia’s (NASDAQ:NCMI) primary audience is Gen Z and Millenials, collectively representing more than 70% of its viewership in Q2, with a reach of around 30 million individuals.
This trend highlights the extent to which the company resonates with its core audience. The company has also added 11 new advertisers with major cinema advertising campaigns year-to-date. In addition, its Silence Your Cell Phones courtesy partnership became the largest revenue driver in its premium offering. Courtesy advertising also experienced a boom, growing by 88% year over year primarily due to travel and tech industry partners.
The company is running on a strong profitability model. Its platinum advertising offering in Q2 became the second-best quarter ever in 2024, trailing behind Q4 2019. Sales in Q2 2024 increased more than 15 times compared to the same period in 2023. Public interest in this exclusive offering is continuing to grow, with advertisers from several premier categories planning to include their campaigns in the coming quarter. These categories include entertainment, government, and dining. In addition, an increasing interest in experiential marketing is also driving demand and opening up new opportunities for the company.
On August 15, Benchmark upgraded National CineMedia (NASDAQ:NCMI) to a Buy from Speculative Buy rating on account of its growth optimism. In addition, B. Riley raised the stock’s price target to $8.50 from $7.50. Its current price target of $7.03 implies an upside of 10.24% from current levels. 12 hedge funds hold stakes in the stock, with Blantyre Capital holding the highest stake worth $117.05 million. The stock ranks fifth on our list of the 10 worst advertising stocks to buy according to short sellers.
4. Magnite, Inc. (NASDAQ:MGNI)
Short Interest: 6.20%
Number of Hedge Fund Holders: 25
Magnite (NASDAQ:MGNI) is an independent sell-side adtech company that provides tech solutions for the automation of the sale and purchase of digital advertising inventory. The company’s platform boasts services and applications for publishers owning and operating connected television (CTV) channels, websites, applications, and other digital media properties to monetize and manage their inventory. Apart from that, it also offers features to sellers of digital advertising inventory and buyers such as agencies, advertisers, agency trading desks, and demand side platforms (DSPs) looking to buy digital advertising inventory.
Magnite (NASDAQ:MGNI) manages a transparent marketplace that connects sellers and buyers, facilitating automated transaction execution at scale and intelligent decision-making. Its ad server and streaming sell-side advertising platform (SSP) offers CTV sellers an all-encompassing solution for yield monetization and management and streamlining workflow across direct-sold and programmatic video inventory.
The company has strong financials and exceeded its top-line financial guidance in Q2 fiscal 2024. It holds a competitive edge in the CTV market due to its selection as Netflix’s programmatic FSP partner. This collaboration has brought significant momentum to Magnite (NASDAQ:MGNI), making it appealing to new investors and partners alike. Its competitive moat stems from continuous investments in various capabilities and features over the years. Key drivers of its strong CTV performance were the growing programmatic adoption by some of the largest industry players, strong overall ad spend growth, and ad serving strength. Its ad spend grew more than 20% in Q2.
Besides its Netflix win, Magnite (NASDAQ:MGNI) secured two additional highly profitable partnerships: United Airlines and Roku. The company recently announced that it is set to act as the centralized ad platform for in-flight entertainment in United Airlines, showing its continued growth in the commerce media space and programmatic advertising arena.
In addition, Magnite (NASDAQ:MGNI) also announced an expansion of its seven-year partnership with Roku in support of powering the new Roku Exchange. Integrating with Magnite (NASDAQ:MGNI) allows the Roku Exchange to connect to the programmatic ecosystem. In addition to connecting the exchange to third-party buyers, Magnite (NASDAQ:MGNI) provides a demand facilitation team and incremental advertising opportunities through its agency and clear-line marketplace solutions.
Magnite’s (NASDAQ:MGNI) total revenue grew 7% to $163 million in Q2 2024 as compared to Q2 2023. 25 hedge funds hold stakes in the stock as of Q2 2024. Choice Equities Fund stated the following regarding Magnite, Inc. (NASDAQ:MGNI) in its Q2 2024 investor letter:
“Magnite, Inc. (NASDAQ:MGNI) – Portfolio holding Magnite is worth a deeper dive given the impressive list of customer wins the company has been announcing recently. Streaming players like Roku, Telus, Media Ocean and, most importantly, Netflix have all chosen Magnite to serve as their sole SSP (Supply Side Platform) to sell their ad inventory programmatically. The recent wins (which add to existing relationships with the likes of AMC Networks, DISH Media, Disney Advertising, FOX Corporation, FuboTV, LG Ads Solutions, VIZIO, and Warner Bros. Discovery) highlight the strength of Magnite’s offering within the Connected TV (CTV) value chain as the largest independent – and unbiased – supply-side ad exchange in the world. Though the wins have come in bunches lately, establishing this advantaged competitive position was not something that happened overnight, as CEO Michael Barrett has employed savvy, strategic acquisitions of CTV supply-side peers Telaria (2020), SpotX (2021), and SpringServe (2021) to bolster this position.”
3. Clear Channel Outdoor Holdings, Inc. (NYSE:CCO)
Short Interest: 6.47%
Number of Hedge Fund Holders: 32
Clear Channel Outdoor Holdings (NYSE:CCO) is an out-of-home advertising company with segments across America, Europe-North, and Airports. It specializes in providing personalized advertising solutions through its elaborate portfolio of urban street furniture, roadside billboards, airport advertising displays, and other similar displays. Its America segment operates in the United States, excluding its airports. The Airports segment offers advertising options around and within the United States, including the Caribbean airports. In contrast, the Europe-North segment covers operations in the Nordics, the United Kingdom, and several other countries throughout central and northern Europe.
The company also has businesses in Latin America, including operations in Peru, Chile, Brazil, and Mexico. Clear Channel Outdoor Holdings (NYSE:CCO) generally operates by outsourcing the manufacturing and design of advertising structures to third parties. The company has a strong profitability mechanism. It delivered a consolidated revenue of $559 million in Q2 fiscal 2024, with a 5.2% – 5.4% increase, excluding foreign exchange rate movements. It also experienced growth in its America, Airport, and Europe-North segments. The company’s performance highlights strong demand from advertisers across most of its markets, with the Airports and Europe-North segments exhibiting exceptional strength.
Clear Channel Outdoor Holdings’ (NYSE:CCO) solid execution throughout a variety of its ongoing initiatives gives it a competitive market edge, expanding its revenue base. Although its Q2 results came through at the low end of guidance, the shift appears temporary due to factors such as softness in the national marketplace, especially in the media entertainment and medical servcies verticals. To ensure positive growth in the coming quarters, the company is improving its business trends to remain on track with its full-year guidance.
Such efforts are leading advertisers and investors alike to divert their attention to the company. Its digital billboard platform is another attraction, which now reaches more than 70% of US adults in its served market every month. In addition, the company’s data and analytics capabilities are allowing it to effectively calculate advertisers’ campaigns and target specific audiences.
Apart from growing revenue generation in its programmatic and digital initiatives, the company also attracts business through its enhanced sales team, website, and direct outreach. 32 hedge funds hold stakes in Clear Channel Outdoor Holdings (NYSE:CCO) as of Q2 2024, with Legion Partners Asset Management holding the highest stakes worth $36.5 million. It takes the third spot on our list of the worst advertising stocks to buy according to short sellers.
2. Interpublic Group of Companies, Inc. (NYSE:IPG)
Short Interest: 6.69%
Number of Hedge Fund Holders: 30
The Interpublic Group of Companies (NYSE:IPG) is a global marketing services and advertising company specializing in data, insights, media, creative and production, healthcare marketing and communications, and digital commerce. It operates through three segments: Integrated Advertising & Creativity Led Solutions (IA&C), Media, Data & Engagement Solutions (MD&E), and Specialized Communications & Experiential Solutions (SC&E).
The MD&E segment provides digital services and products, global media and communications services, advertising and marketing technology, data management and analytics, e-commerce services, strategic consulting, and digital brand experience. This segment runs Acxiom and IPG Mediabrands. The IA&C segment, in contrast, provides advertising, strategic consulting, and corporate and brand identity services. The SC&E segment covers global public relations and other specialized communications services, sports, entertainment marketing, events, and strategic consulting.
The company is backed by solid financials and reported strong second-quarter results. Organic growth in Q2 fiscal 2024 before billable expenses rose to 1.7%, bringing total organic growth in the first half of 2024 to 1.5%. Central America, Latin America, and the UK experienced significant growth, followed by increased growth in markets in the US and other parts of the world. In addition, each of the company’s three operating systems grew organically as compared to the same period in 2023.
IPG Mediabrands and IPG Health are some of the company’s key drivers of growth. In addition, Golin, Acxiom, and Deutsch LA also saw solid quarterly growth. The company expects to continue its growth trajectory, anticipating the most consistent and strongest business growth areas to be tech and data-driven media offerings, PR and experiential marketing capabilities, and specialist healthcare marketing expertise. Growth in two of its largest and most successful businesses, IPG Mediabrands and IPG Health, is driven by the specialized high-value services the company provides to marketers, earning it a competitive edge. It reaches audiences more precisely and relies on more technical skill sets to lead to outcomes.
The company expects Generative AI to further enhance its broad range of offerings. It is collaborating with Amazon, Adobe, Getty Images, Blackbird.AI, Microsoft, Google, and other significant industry players to gain enterprise access to large language models and advanced AI tools. These resources are being increasingly implemented in all sectors of the company’s business segments, including creative ideation in production, experiential communications practices, insight generation, and advanced media and precision marketing capabilities. Interpublic Group of Companies (NYSE:IPG) takes the second spot on our list of the worst advertising stocks to buy as per short sellers.
1. Cardlytics, Inc. (NASDAQ:CDLX)
Short Interest: 17.31%
Number of Hedge Fund Holders: 19
Cardlytics (NASDAQ:CDLX) operates a digital advertising platform within its partners and its own digital channels. These include mobile applications, online, email, and various real-time notifications. The Cardlytics platform allows marketers to deliver advertising content to customers and earn rewards, funded with a portion of the fee collected from them. The platform equips marketers to reach their potential customers across a wide array of financial institutions (FI) partners through their digital banking accounts.
The company also operates Bridg, a customer data platform that leverages point-of-sale (POS) data (including product-level purchase data) to enable partners to perform analytics and targeted loyalty marketing. Marketers can also calculate the impact of their marketing. Cardlytics (NASDAQ:CDLX) operates in the United States and the United Kingdom.
Cardlytics (NASDAQ:CDLX) is continuing to make progress across the new technology releases in three areas: the adoption and refinement of its Ad Decisioning Engine (ADE), the launch of its Automated Insights Dashboard, and the launch of its Dynamic Marketplace. 80% of the company’s banks are already onboard ADE, with continued progress in transitioning the rest. In addition, the Automated Insights Dashboard allows advertisers to access on-demand insights. This launch is expected to increase the overall billing opportunity as spend thresholds are required for access, and enables advertisers to take real-time action. The Dynamic Marketplace includes a transition to its engagement-based pricing model. These interventions are expected to appeal to advertisers, helping the company solidify its market standing.
Cardlytics’ (NASDAQ:CDLX) growth plans bring optimism to the company. These include a strengthened financial profile to reduce operating expenses, improve capital structure, and facilitate continued strategic business investments. It also holds clear plans to align its offerings with the modern advertising market, increasing consumer incentives and billings. In addition, the company is taking proactive steps to address its challenges. These include delivering an improved monetization value to its buyers, brands, and banks. The starting point to address such challenges for the company is improving delivery, forecasting, and pricing while simultaneously delivering a platform that exceeds advertiser expectations and needs.
The company is making solid progress in growing its engagement. Consumer incentives rose by 25% in Q2, which shows that consumers are finding value in the company’s offerings. These engagement-driven initiatives are expected to attract more marketing budgets to the platform, adding to its flywheel effect.
Cardlytics’ (NASDAQ:CDLX) has considerable expansion and growth plans in place. It holds a competitive market edge due to its unrivaled first-party purchase data, with cardholders’ spending data ranking as the best predictor of its future and making it valuable for advertisers. It is thus running on a flywheel effect of brands, buyers, and banks, increasing its customer base of cardholders with rewards and, in turn, driving incremental spending for advertisers and banks.
Overall, CDLX ranks first among the 10 worst advertising stocks to buy now. While we acknowledge the potential of advertising companies, our conviction lies in the belief that 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 CDLX but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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