In this article, we discuss 11 best advertising stocks to invest in. If you want to see more stocks in this selection, check out 5 Best Advertising Stocks To Invest In.
According to PricewaterhouseCoopers, online advertising spend in 2021 came in at $189.3 billion, about 2.7-times ahead of the spending on TV ads, which stood at $69.7 billion. In 2022, PwC expects that online advertising spending will climb to $218 billion, essentially tripling the TV ad spend, which is forecasted to experience a slow growth rate. Latest estimates, assuming a compound annual growth rate (CAGR) of 7.99% from 2021 through to 2026, expect the online advertising market in the US to reach $278 billion. By 2026, the dollar spend on online advertising is predicted to be over 3.8-times that of TV advertising spend.
However, big tech is making moves that will impact the advertising world directly, in addition to inflation and consequent budget cuts hammering the industry. Privacy changes like Apple’s AppTrackingTransparency policy will not allow advertisers to track users on iOS and disrupt monetization and measurement of data insights. Resultantly, Meta announced that these privacy changes could cost the company about $10 billion in 2022, and since it failed to provide a similar replacement, advertisers are leaving Facebook. This will highly affect Meta’s annual growth rate of ad revenues.
While the industry goes through big changes, valuations become attractive and investors should look into picking up notable advertising stocks like Netflix, Inc. (NASDAQ:NFLX), The Trade Desk, Inc. (NASDAQ:TTD), and Alphabet Inc. (NASDAQ:GOOG).
Our Methodology
We selected the following advertising stocks based on growth fundamentals, positive analyst coverage, and strong hedge fund sentiment as of June 2022. We have arranged the list according to the number of hedge fund holders in each firm, tracked by Insider Monkey as of the second quarter of 2022.
Allen.G/Shutterstock.com
Best Advertising Stocks To Invest In
11. Stagwell Inc. (NASDAQ:STGW)
Number of Hedge Fund Holders: 11
Stagwell Inc. (NASDAQ:STGW) is a New York-based company focused on digital transformation, performance media and data, consumer insights and strategy, and creativity and communications services. The company operates through three segments – Integrated Agencies Network, Media Network, and Communications Network. On October 12, Stagwell Inc. (NASDAQ:STGW) acquired Maru Group, a software experience and insights data platform. Maru solidifies Stagwell Marketing Cloud’s global, blue-chip client list and enhances its presence in Buenos Aires, Chicago, London, Los Angeles, New York, San Francisco, Southampton, Toronto, and Vancouver.
Needham analyst Laura Martin on September 6 initiated coverage of Stagwell Inc. (NASDAQ:STGW) with a Buy rating and a $9.00 price target. The analyst is optimistic about Stagwell Inc. (NASDAQ:STGW)’s “predictable” revenue and earnings as 20% of its annual sales are generated from recurring maintenance contracts and 60%-70% of revenue is made from multi-year contracts. The analyst added that Stagwell Inc. (NASDAQ:STGW) is “inexpensive” compared to 11 ad-driven companies in her coverage, and she sees “material valuation multiple upside”.
According to Insider Monkey’s second quarter database, 11 hedge funds held stakes worth $77.5 million in Stagwell Inc. (NASDAQ:STGW), compared to 10 funds in the prior quarter $95.7 million.
Like Netflix, Inc. (NASDAQ:NFLX), The Trade Desk, Inc. (NASDAQ:TTD), and Alphabet Inc. (NASDAQ:GOOG), Stagwell Inc. (NASDAQ:STGW) is one of the best advertising stocks to invest in.
10. DoubleVerify Holdings, Inc. (NYSE:DV)
Number of Hedge Fund Holders: 12
DoubleVerify Holdings, Inc. (NYSE:DV) was founded in 2008 and is headquartered in New York. The company offers a software platform for digital media measurement, data, and analytics in the United States and internationally. DoubleVerify Holdings, Inc. (NYSE:DV) provides solutions to advertisers which enhance the effectiveness, quality, and return on their digital advertising investments. The company has attractive unit economics and multiple blue-chip customers. It is one of the best advertising stocks to monitor.
On October 18, Barclays analyst Raimo Lenschow maintained an Equal Weight rating on DoubleVerify Holdings, Inc. (NYSE:DV) but trimmed the price target on the shares to $26 from $27. In the presently uncertain outlook, the analyst favors cash flow positive, established software vendors.
According to Insider Monkey’s second quarter database, 12 hedge funds were long DoubleVerify Holdings, Inc. (NYSE:DV), with combined stakes worth $137 million, compared to 16 funds in the prior quarter worth $254.4 million. Chase Coleman’s Tiger Global Management is the leading position holder in the company, with 2.8 million shares valued at $63.3 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.”
9. Deluxe Corporation (NYSE:DLX)
Number of Hedge Fund Holders: 14
Deluxe Corporation (NYSE:DLX) is a Minnesota-based provider of technology-led solutions to enterprises, small businesses, and financial institutions in the United States, Canada, Australia, South America, and Europe. It operates through four segments – Payments, Cloud Solutions, Promotional Solutions, and Checks. The company offers business forms, advertising specialties, promotional apparel, and retail packaging services. Deluxe Corporation (NYSE:DLX) is one of the top advertising stocks to consider.
On November 3, Deluxe Corporation (NYSE:DLX) reported its third quarter results, posting non-GAAP earnings per share of $0.99, beating market estimates by $0.05. The revenue of $555 million climbed 4.4% year-over-year and outperformed Wall Street consensus by $25.45 million. For the full-year 2022, Deluxe Corporation (NYSE:DLX) expects revenue growth of 8% to 10%, versus a 9.28% consensus.
Cowen analyst Lance Vitanza on August 5 reiterated an Outperform rating on Deluxe Corporation (NYSE:DLX) but lowered the price target on the stock to $36 from $42. The analyst said underlying demand remains resilient, with strong organic volume growth despite successful pricing actions. The shift towards Payments and Data and the One Deluxe model is paying off and management is working diligently to combat margin pressure.
Among the hedge funds tracked by Insider Monkey, Chuck Royce’s Royce & Associates is the largest stakeholder of Deluxe Corporation (NYSE:DLX) as of Q2 2022, with 632,906 shares worth $13.7 million.
8. Criteo S.A. (NASDAQ:CRTO)
Number of Hedge Fund Holders: 14
Criteo S.A. (NASDAQ:CRTO) was incorporated in 2005 and is headquartered in Paris, France. It is a technology company that specializes in marketing and monetization services in North and South America, Europe, the Middle East, Africa, and the Asia-Pacific. The company offers customized creative advertising content by optimizing individual client preferences, and Criteo S.A. (NASDAQ:CRTO) generates advertising revenues from consumer brands by monetizing their data and audiences through personalized ads. It is one of the premier advertising stocks to buy now.
On October 10, Morgan Stanley analyst Brian Nowak raised the price target on Criteo S.A. (NASDAQ:CRTO) to $35 from $32 and kept an Equal Weight rating on the shares. His latest industry checks demonstrate that the online ad market seems to be holding up “relatively well” and he still forecasts 11% year-over-year U.S. online ad growth in 2022, but trends vary largely by ad vertical, the analyst wrote in a research note.
According to Insider Monkey’s Q2 data, 14 hedge funds were bullish on Criteo S.A. (NASDAQ:CRTO), with collective stakes worth $290 million, compared to 17 funds in the prior quarter worth $281 million. Ahmet Okumus’ RPD Fund Management is the largest stakeholder of the company, with 2.3 million shares valued at $56 million.
7. Ziff Davis, Inc. (NASDAQ:ZD)
Number of Hedge Fund Holders: 19
Ziff Davis, Inc. (NASDAQ:ZD) is a New York-based company that provides internet information and services in the United States, Canada, Ireland, and internationally. The Cybersecurity and Martech segment offers cloud-based subscription services to consumers and businesses, including cybersecurity, privacy, and marketing technology. The management also has a robust track record of value-accretive acquisitions to expand into strategic end-markets.
Evercore ISI analyst Shweta Khajuria on September 20 initiated coverage of Ziff Davis, Inc. (NASDAQ:ZD) with an Outperform rating and a $90 price target. A leading buyer and operator of Digital Media and Internet businesses, Ziff Davis, Inc. (NASDAQ:ZD) has diversified its revenue base with advertising and subscription businesses across seven core verticals, the analyst told investors. The analyst would be a buyer given the attractive risk/reward and short-to-mid term catalysts that include M&A activity likely in Q1 2023 and beyond and further share repurchases.
According to Insider Monkey’s data, 19 hedge funds reported owning stakes worth $294 million in Ziff Davis, Inc. (NASDAQ:ZD) at the end of Q2 2022, compared to 24 funds in the last quarter worth $408.7 million. Amy Minella’s Cardinal Capital is the largest stakeholder of the company, with 1.5 million shares valued at $112.6 million.
6. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 23
Magnite, Inc. (NASDAQ:MGNI) operates an independent sell-side advertising platform in the United States and internationally. The company was incorporated in 2007 and is headquartered in New York. On October 19, Fox Corporation (NASDAQ:FOX) announced a partnership with Magnite, Inc. (NASDAQ:MGNI) to power programmatic campaigns for OneFOX video inventory across the Fox entertainment, sports, streaming, and news portfolio. Magnite, Inc. (NASDAQ:MGNI) will serve as a sell-side advertising platform connected to the OneFOX inventory.
On August 10, Susquehanna analyst Shyam Patil reiterated a Positive rating on Magnite, Inc. (NASDAQ:MGNI) but lowered the firm’s price target on the shares to $13 from $24. The analyst noted that Magnite, Inc. (NASDAQ:MGNI) reported a solid Q2, with CTV exceeding forecasts despite macro headwinds. He said although the guidance was a bit lower due to the tough macro, most of the softness is from desktop, not CTV.
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 leading position holder in the company, with 2.36 million shares worth $21 million.
In addition to Netflix, Inc. (NASDAQ:NFLX), The Trade Desk, Inc. (NASDAQ:TTD), and Alphabet Inc. (NASDAQ:GOOG), Magnite, Inc. (NASDAQ:MGNI) is one of the top advertising stocks to monitor.
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.”
Click to continue reading and see 5 Best Advertising Stocks To Invest In.
Suggested articles:
Disclosure: None. 11 Best Advertising Stocks To Invest In is originally published on Insider Monkey.
