In this article, we will take a look at the 12 best advertising stocks to invest in. To see more such companies, go directly to 5 Best Advertising Stocks To Invest In.
Advertising companies have been battered over the past several months amid declining spending on ads as companies remain in a wait and see mode due to recession fears. However, latest data indicates a revival in the ads industry might be starting. Advertising research and data company Magna recently upped its ad growth estimate for 2023 to 5.2% up from 4.2%. Magna’s executive vice president of global market intelligence Vincent Létang said that while the industry is not “out of the woods yet,” the firm is increasing its forecast for ad spending and ads revenues for the second half of 2023.
“It’s the first time we’ve raised the expectation in three or four updates. It might be a turning point,” Vincent Létang wrote in a report, according to a Wall Street Journal report.
The analyst said that data shows marketers in key industries like pharma, travel, retail and consumer industry posted strong spending during the second quarter of 2023.
Importantly, Magna expects digital media to see a rise of 9.6% in 2023. Spending on traditional ad channels like TV has been on a decline for several years. But another trend spotted earlier this year is rather more interesting and could change the industry dynamics. Insider Intelligence earlier this year reported that Meta Platforms and Alphabet no longer account for the biggest chunk of the digital ad spending as other players like TikTok, Amazon, Snap, among others, attract advertisers who are always looking for more options. In 2022, Google and Meta accounted for about 48.4% of U.S. digital-ad spending. Insider Intelligence said that these two companies never saw their share of ad spending go lower than 50% since 2014. But last year that streak came to an end and this might be a sign of things to come in the industry.
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Our Methodology
For this article we first listed down all holdings of the Advertising and Marketing Technology ETF (MRAD) and then gauged number of hedge fund investors for each stock. We then picked 12 stocks with the highest number of hedge fund investors. Therefore, these are the best advertising stocks to buy according to hedge funds. Some top names in the list include Alphabet Inc. (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META).
Best Advertising Stocks To Invest In
12. Criteo S.A. (NASDAQ:CRTO)
Number of Hedge Fund Holders: 21
Insider Monkey’s database of 910 hedge funds shows that 21 funds had stakes in Criteo S.A. (NASDAQ:CRTO). The most significant stake in Criteo S.A. (NASDAQ:CRTO) was owned by Richard Mashaal’s Rima Senvest Management which owns an $89 million stake in the firm. In August, Criteo S.A. (NASDAQ:CRTO) posted second quarter results. Adjusted EPS in the quarter came in at $0.49, beating estimates by $0.05. Revenue jumped 11.6% year over year to $240 million, beating estimates by $8.87 million.
11. LiveRamp Holdings, Inc. (NYSE:RAMP)
Number of Hedge Fund Holders: 21
Data and marketing company LiveRamp Holdings, Inc. (NYSE:RAMP) ranks 11th in our list of the best advertising stocks to invest in according to smart money investors. A total of 21 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in LiveRamp Holdings, Inc. (NYSE:RAMP).
In August LiveRamp Holdings, Inc. (NYSE:RAMP) posted fiscal first quarter results. Adjusted EPS in the period came in at $0.29, beating estimates by $0.10. Revenue in the quarter jumped 8% year over year to $154 million, surpassing estimates by $7.01 million.
During its fiscal Q1 earnings call LiveRamp Holdings, Inc. (NYSE:RAMP) talked about digital advertising business and future outlook:
First, we’re off to a strong start to fiscal ’24. Q1 exceeded our expectations on both the top and bottom line. Our operating margin expanded by 11 percentage points, and this was our first ever quarter with positive GAAP operating profit. Second, there continue to be many levers for us to continually improve our financial performance, and we’re focused on reestablishing strong recurring double-digit revenue growth. This will be driven short term by the tactical initiatives we have in motion and longer term by some mega trends that are propelling digital advertising. Namely, new messaging opportunities in retail, media and CTV, a shift to cloud computing, the transition from cookies to true authentication, and generative AI.
Third, we continue to drive meaningful operating income growth and margin expansion and have…[Read the full earnings call transcript here.]
Meridian Contrarian Fund made the following comment about LiveRamp Holdings, Inc. (NYSE:RAMP) in its Q2 2023 investor letter:
“A holding that warranted an additional investment during the quarter was LiveRamp Holdings, Inc. (NYSE:RAMP) a developer of a data connectivity platform that sharpens targeted advertisement placements while shielding consumer data privacy. The company’s technology allows improved advertising targeting and measurement across internet-based, streaming, and traditional verticals while meeting the ever-shifting data privacy regulations being enacted globally. We initially invested in the first quarter of 2023 following a difficult 2022 in which advertising spending slowed and LiveRamp rolled out new products and brought on new salespeople—which all combined to drive down earnings. In addition to the investments in future growth, however, management also reduced legacy products, which has lowered costs and improved earnings and cash flow through the first part of 2023, despite a still-tough advertising environment. We added to our position during the second quarter as the company’s internally driven earnings turn appeared to take hold, emphasizing our approach to opportunistic value and gaining access to one of the fastest-growing advertising verticals such as streaming television.”
10. Perion Network Ltd. (NASDAQ:PERI)
Number of Hedge Fund Holders: 23
Israel-based digital advertising products and services company Perion Network Ltd. (NASDAQ:PERI) has seen an 8% jump in its stock price over the past one year. In August Perion Network Ltd. (NASDAQ:PERI) posted strong Q2 results. Adjusted EPS in the quarter came in at $0.84, surpassing estimates by $0.18. Revenue in the quarter jumped 21.7% year over year to $178.5 million, beating estimates by $2.5 million. Perion Network Ltd. (NASDAQ:PERI) said the number of average daily searches in the quarter jumped by 68% year over year to 28.6 million. Search advertising publishers increased by 28% on a YoY basis.
A total of 23 hedge funds out of the 910 hedge funds tracked by Insider Monkey as of the end of the second quarter of 2023 had stakes in Perion Network Ltd. (NASDAQ:PERI).
Like Alphabet Inc. (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META), PERI is one of the digital ads stocks liked by hedge funds.
Richie Capital Group made the following comment about Perion Network Ltd. (NASDAQ:PERI) in its Q1 2023 investor letter:
“Perion Network Ltd. (NASDAQ:PERI) (PERI up +56.4%) – Our investment in the Israeli based ad-tech company has now been a top performer for two quarters in a row. In February, Perion announced full year 2022 earnings which included guidance for 14% revenue and EBITDA growth in 2023. This implies meaningful growth in a challenging environment where their peers continue to struggle. Despite the stock’s strong performance, Perion is still trading at a modest 19x earnings.
In addition to the optimistic growth outlook, Perion seems to be benefiting from anticipation of Bing’s new ChatGPT driven search engine. Bing is Perion’s largest customer. We, along with Perion’s management, believe that the “new Bing” offers a meaningful growth opportunity. The more users convert to Bing, the more publishers will advertise on the platform and drive Perion revenue. On Microsoft’s Q4 earnings call, CFO Amy Hood discussed the impact of growing Bing market share: “every percentage point of share it gains in search equals roughly $2 billion in additional advertising revenue.” It is difficult to envision a scenario where Perion is not a direct beneficiary of Bing’s success…” (Click here to view the full text)
9. Roku, Inc. (NASDAQ:ROKU)
Number of Hedge Fund Holders: 29
Streaming platform company Roku, Inc. (NASDAQ:ROKU) also provides digital advertising services. It has a demand-side ad platform and content distribution services, such as subscription and transaction revenue shares. Roku, Inc. (NASDAQ:ROKU) stock recently fell after Wells Fargo downgraded it citing softness in the ads market. In September, CFRA upgraded Roku, Inc. (NASDAQ:ROKU), citing “sizable” market opportunity in streaming. CFRA upped its price target for ROKU to $75 from $65.
Insider Monkey’s proprietary database of 910 hedge funds shows that 29 hedge funds were long Roku, Inc. (NASDAQ:ROKU). The most significant stakeholder of Roku, Inc. (NASDAQ:ROKU) during this period was Catherine D. Wood’s ARK Investment Management which had a $765 million stake in the company.
Here is what Saga Partners has to say about Roku, Inc. (NASDAQ:ROKU) in its Q2 2022 investor letter:
“The Portfolio first bought Roku in Q3’20. It was a company we followed closely given our investment in The Trade Desk and its importance in connected television (CTV). Roku continued to impressively grow its CTV market share and it took some extra work to understand the underlying dynamics causing Roku’s success. I think there is some misunderstanding surrounding the connected television landscape. Since I haven’t written extensively on the topic in past letters, I thought it would be helpful to provide a little more background on the underlying dynamics of the space below…” (Click here to see the full text)
8. Baidu, Inc. (NASDAQ:BIDU)
Number of Hedge Fund Holders: 36
Chinese internet giant Baidu, Inc. (NASDAQ:BIDU) is one of the top advertising stocks to buy now according to hedge funds. Baidu, Inc. (NASDAQ:BIDU) posted strong second quarter results as the company’s net profit jumped 43% on a YoY basis, driven by online-marketing and video-streaming services.
However, in October, Baidu, Inc. (NASDAQ:BIDU) received several downgrades ahead of its Q3 results amid expected headwinds in ads business and overall macroeconomic challenges in China. J.P. Morgan maintained its Overweight rating on Baidu, Inc. (NASDAQ:BIDU) but decreased its price target to $185 from $200.
Ariel Global Fund made the following comment about Baidu, Inc. (NASDAQ:BIDU) in its Q2 2023 investor letter:
“By comparison, after a strong run last quarter, China’s internet search and online community leader, Baidu, Inc. (NASDAQ:BIDU) declined alongside a correction in Chinese stocks attributed to weak gross domestic product. We believe this price action runs counter to the company’s solid business fundamentals. Baidu delivered a top- and bottom-line earnings beat in the period, driven by a recovery in ad and cloud revenues. The company continues to invest heavily in Artificial Intelligence (AI) and is launching a generative AI, Ernie Bot, aimed at rivaling Open AI’s ChatGPT. While monetization of the new technology is largely dependent on regulatory review, we think Baidu should continue to experience margin improvement with the ongoing implementation of efficiency and profitability initiatives. While some investors remain on the sidelines due to uncertainty surrounding China’s economic growth, government regulations, and the political rhetoric towards Taiwan, we remain enthusiastic about Baidu’s longer-term opportunity for revenue growth and margin expansion across internet search, cloud, autonomous driving, artificial intelligence and online video.”
7. The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 37
California-based The Trade Desk, Inc. (NASDAQ:TTD) provides real-time programmatic marketing automation solutions. In September, investment firm UBS started covering The Trade Desk, Inc. (NASDAQ:TTD) with a Buy rating and a $100 price target.
However, The Trade Desk, Inc. (NASDAQ:TTD) recently fell after the company’s CEO sold about $14.9 million worth of company shares.
Out of the 910 hedge funds in Insider Monkey’s database, 37 hedge funds reported owning stakes in The Trade Desk, Inc. (NASDAQ:TTD). The biggest stakeholder of The Trade Desk, Inc. (NASDAQ:TTD) during this period was Nancy Zevenbergen’s Zevenbergen Capital Investments which owns a $223 million stake in the company.
During its earnings call in August, the company talked about its future outlook:
Turning to our outlook for the third quarter. While macro conditions remain uncertain, visibility has improved slightly since the beginning of the year. We estimate Q3 revenue to be at least $485 million, which would represent growth of 23% on a year-over-year basis.
Excluding U.S. political election spend, which represented a low single-digit percent of spend in Q3 2022, our estimated revenue growth rate in Q3 of this year would be about 25% on a year-over-year basis. We estimate adjusted EBITDA to be approximately $185 million in Q3. In closing, we’re extremely pleased with our strong performance in the first half of the year. I’ve always seen the immense opportunity this company has. And frankly, that opportunity has never been clearer than it is today. We have a large and growing addressable market in front of us. We have a business model that’s proven to generate strong top line growth in addition to significant profitability and cash flow. With growth drivers including CTV, retail media or international business, a strong identity strategy, a 2024 U.S. election year cycle, and a significant product upgrade with Kokai, among others, we remain highly optimistic about our future as we move through the second half of 2023 and into 2024.
Read the full earnings call transcript here.
ClearBridge Mid Cap Growth Strategy made the following comment about The Trade Desk, Inc. (NASDAQ:TTD) in its Q2 2023 investor letter:
“We initiated a new position in The Trade Desk, Inc. (NASDAQ:TTD), the leading trading platform for advertisers to buy programmatic ad space, such as the banner ads on a website or the commercials played while streaming TV. Programmatic ads are secularly taking share from traditional forms of advertising, and much like financial trading platforms, The Trade Desk enjoys meaningful network effects that makes it the clear leader in the space. The stock sold off entering 2023 as investors worried over macro pressures on ad budgets, and we capitalized on this opportunity to buy a well-entrenched compounder in a large, growing market.”
6. HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 57
Inbound marketing and solutions company HubSpot, Inc. (NYSE:HUBS) ranks 6th in our list of the best advertising stocks to invest in according to smart money investors. As of the end of the second quarter of 2023, 57 hedge funds had stakes in HubSpot, Inc. (NYSE:HUBS). The biggest hedge fund stakeholder of HubSpot, Inc. (NYSE:HUBS) was Colin Moran’s Abdiel Capital Advisors which had a $604 million stake in the company.
In August, HubSpot, Inc. (NYSE:HUBS) posted second quarter results, according to which its EPS in the period came in at $1.34, surpassing estimates by $0.35. Revenue jumped 25.5% year over year to $529.1 million, beating estimates by $23.61 million.
ClearBridge Small Cap Growth Strategy made the following comment about HubSpot, Inc. (NYSE:HUBS) in its Q3 2023 investor letter:
“In addition, we continued to reduce or eliminate positions which have increased in capitalization, including marketing automation software provider HubSpot, Inc. (NYSE:HUBS).”
Like HUBS, hedge funds also like Alphabet Inc. (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Meta Platforms, Inc. (NASDAQ:META).
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Disclosure: None. 12 Best Advertising Stocks To Invest In is originally published on Insider Monkey.
