In this article, we discuss 5 ad-tech stocks to buy as the industry goes through upheavals. If you want to see more stocks in this selection, check out 10 Ad-Tech Stocks to Buy as Industry Goes Through Upheaval.
5. Digital Turbine, Inc. (NASDAQ:APPS)
Number of Hedge Fund Holders: 27
Digital Turbine, Inc. (NASDAQ:APPS) is a Texas-based company that operates a mobile growth platform for advertisers, publishers, carriers, and device original equipment manufacturers (OEMs). The company announced a Q2 non-GAAP EPS of $0.38 and a revenue of $188.63 million, ahead of Wall Street estimates by $0.03 and $3.69 million, respectively.
On August 9, Craig-Hallum analyst Anthony Stoss maintained a Buy rating on Digital Turbine, Inc. (NASDAQ:APPS) but lowered the price target on the shares to $60 from $85. The analyst believes the SingleTap software from Digital Turbine, Inc. (NASDAQ:APPS) is a game changer for the in-app advertising market and the stock could be a multi-bagger again.
According to Insider Monkey’s data, 27 hedge funds were bullish on Digital Turbine, Inc. (NASDAQ:APPS) at the end of June 2022, compared to 32 funds in the prior quarter. Greenhaven Road Investment Management is the leading stakeholder of the company, with 1.40 million shares worth $24.45 million.
Here is what Greenhaven Road Capital has to say about Digital Turbine, Inc. (NASDAQ:APPS) in its Q1 2022 investor letter:
“Digital Turbine (NASDAQ:APPS) – Digital Turbine has effectively zero exposure to oil or Ukraine, is well equipped to deal with inflation as all of its inputs and outputs are digital, and should have zero issues with rising rates. Shares got hammered with the decline in “growth stocks” as well as a concern that Google would change its policies on Android device IDs that are used for advertising targeting and attribution (a change that wasn’t put in place but was discussed in a blog post). Given that Digital Turbine has software on devices and is not reliant on the Android device IDs for attribution, it is more likely they would be a beneficiary of this change than a victim. Add in the fact that the European Union is progressing towards a Digital Markets Act that would compel Apple to allow for competing app stores, the regulatory landscape is favorable to Digital Turbine. The decline is exceedingly frustrating.
Our investment in Digital Turbine is predicated on three beliefs. The first is that companies will continue to want direct relationships with their customers via apps. The second is that companies will go to where the eyeballs are, which means mobile phones for the foreseeable future. The third belief is that Digital Turbine can carve out a durable and profitable niche between end users and app developers/carriers/handset manufacturers. All of these beliefs remain in place; nothing has changed. Digital Turbine’s software is installed on over 1.5 billion devices and growing, and they work with more carriers and companies every quarter.
In terms of valuation, management has guided to tripling revenues and 10Xing profits over the next three to five years. Yes, that is a long time and a lot can go wrong, but we are not paying for that level of upside. If you take the last quarter’s run rate earnings, adjusting for one-time expenses related to acquisitions and the amortization of intangibles, you get an adjusted net income of approximately 43 cents per share or $1.72 per share annualized. This is for a core legacy business that grew 43% with large wins for the MobilePosse business and a SingleTap business with a bright future. Unlike many high growth companies, Digital Turbine is profitable while growing and has a PEG ratio below 1.”
4. The Interpublic Group of Companies, Inc. (NYSE:IPG)
Number of Hedge Fund Holders: 30
The Interpublic Group of Companies, Inc. (NYSE:IPG) is a New York-based company offering advertising and marketing services worldwide. The company provides consumer advertising, digital marketing, communications planning, public relations, and data science services. Redburn analyst Bianca Dallal resumed coverage of The Interpublic Group of Companies, Inc. (NYSE:IPG) on September 8 with a Neutral rating. Previously, on August 25, Exane BNP Paribas analyst Lina Ghayor initiated coverage of Interpublic Group with an Outperform rating. It remains one of the top ad-tech stocks to buy as the industry faces upheavals.
On August 30, The Interpublic Group of Companies, Inc. (NYSE:IPG) declared a $0.29 per share quarterly dividend, in line with previous. The dividend is distributable on September 15, to shareholders of record as of September 1. The company also delivered market-beating Q2 results.
According to Insider Monkey’s data, 30 hedge funds were bullish on The Interpublic Group of Companies, Inc. (NYSE:IPG) at the end of Q2 2022, compared to 32 funds in the earlier quarter. Harris Associates held the leading position in the company, consisting of 14.5 million shares worth about $400 million.
Here is what Ariel Fund & Ariel Appreciation Fund has to say about The Interpublic Group of Companies, Inc. (NYSE:IPG) in its Q3 2021 investor letter:
“Marketing communication company, Interpublic Group of Companies, Inc. (IPG) was the top contributor over the trailing one-year period. Notably, IPG is delivering a stronger than expected revenue mix between Technology and Healthcare relative to its peer group, solid cost containment and margin expansion. Meanwhile, the company continued to focus on de-levering the balance sheet. In our view, IPG’s Acxiom acquisition for data has proven to be a winner, helping the company increase their revenue across all eight major advertising sectors by industry. We believe these results continue to demonstrate the strength and resiliency of the business model and expect IPG to be a beneficiary of increasing advertising and marketing budgets across an improving global economy.”
3. The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 34
The Trade Desk, Inc. (NASDAQ:TTD) is a California-based technology company that operates a self-service on-demand platform, allowing users to create and optimize data-driven digital advertising campaigns across multiple ad formats and channels. The stock climbed 36% on August 10 as The Trade Desk, Inc. (NASDAQ:TTD) reported Q2 results that outperformed estimates, and analysts praised the company for its “exceptional” execution. For Q3 2022, The Trade Desk, Inc. (NASDAQ:TTD) expects a revenue of $385 million, ahead of the Wall Street consensus of $382.3 million. The company anticipates an EBITDA of about $140 million. This makes The Trade Desk, Inc. (NASDAQ:TTD) one of the top ad-tech stocks to buy.
Wolfe Research analyst Gal Munda on August 16 initiated coverage of The Trade Desk, Inc. (NASDAQ:TTD) with a Peer Perform rating. The analyst said The Trade Desk, Inc. (NASDAQ:TTD) continues to defy the rest of the Advertising Technology industry. He contended that the stock’s performance remains excellent, but the market has recognized that as the shares gained more than 30% after posting Q2 results.
According to Insider Monkey’s second quarter data, 34 hedge funds were bullish on The Trade Desk, Inc. (NASDAQ:TTD), with collective stakes worth about $544 million. Zevenbergen Capital Investments is the largest position holder in the company, with 3.2 million shares worth $138 million.
Here is what Rowan Street has to say about The Trade Desk, Inc.(NASDAQ:TTD) in its Q2 2022 investor letter:
“Jeff Green, Founder/CEO of Trade Desk
Jeff has been on a mission to make data-driven advertising as ubiquitous as electronic trading in equities ever since he founded the Trade Desk in 2009. Since day one, his goal was to create a platform where advertisers could value media inventory through data-driven decisions. With the ability to buy and sell advertising inventory electronically or programmatically, advertisers could use data to make better decisions on what, when, and whom to show an ad impression. Jeff owns 10% of the company. Jeff has built Trade Desk into a leader in ad tech, with a record of $6.2 billion spent on the platform in 2021, up 6x since 2016. Revenues are estimated to hit $1.6 billion in 2022, up almost 8x since 2016.”
2. Publicis Groupe S.A. (OTC:PUBGY)
Number of Hedge Fund Holders: N/A
Publicis Groupe S.A. (OTC:PUBGY) is a French company that specializes in marketing, communications, and digital business transformation services. The firm operates in North America, Europe, the Asia Pacific, Latin America, Africa, and the Middle East. The company achieved organic growth of 10.3% in Q2, and for the rest of the year, Publicis Groupe S.A. (OTC:PUBGY) expects organic growth of 6% to 7%, operating margin rate between 17.5% and 18%, and free cash flow of at least €1.5 billion.
Redburn analyst Bianca Dallal on September 8 resumed coverage of Publicis Groupe S.A. (OTC:PUBGY) with a Buy rating, citing valuation discount and proven earnings strength, which she views as “a compelling margin of safety”.
1. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) is one of the best ad-tech stocks to buy as the industry faces upheavals. The company is in the process of developing an ad-tiered plan, which will be less expensive than its current ones, and will compete with industry peers. On September 7, Macquarie analyst Tim Nollen upgraded Netflix, Inc. (NASDAQ:NFLX) to Neutral from Underperform with a price target of $230, up from $170. The analyst is now more confident in Netflix, Inc. (NASDAQ:NFLX)’s long-term upside potential. He expects that Netflix, Inc. (NASDAQ:NFLX) could generate up to $3.6 billion in U.S. and Canada sales by 2025 and $8.5 billion globally with ads, as well as $2 billion in total incremental revenue.
According to Insider Monkey’s data, 95 hedge funds were long Netflix, Inc. (NASDAQ:NFLX) at the end of Q2 2022, compared to 109 funds in the last quarter. Ken Fisher’s Fisher Asset Management featured as the biggest position holder in the company, with 6.5 million shares worth $1.14 billion.
Here is what L1 Capital International specifically said about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2022 investor letter:
“While it seems an eternity ago, in April Netflix, Inc. (NASDAQ:NFLX) reported Q1 2022 results and gave forward guidance which flashed many red flags. Not only were subscription numbers (and forward guidance) well below expectations, but management also gave new disclosure on the massive extent of password sharing which raises concerns that Netflix is much more mature than we had previously considered, constraining future growth. Management also haphazardly announced it will introduce an advertising-supported subscription tier, albeit currently lacking the necessary capabilities to do so. Despite continuing to produce world-leading content, we have lost confidence in management’s ability to respond to increased competition and a more challenging operating environment. We sold our entire investment in Netflix immediately post Q1 2022 results. Currently we do not consider Netflix to meet our stringent quality criteria to be considered as a potential investment in the Fund.”
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