In this article, we will look at the 10 Worst Marketing Stocks to Buy. Let’s look at where Thryv Holdings (THRY) stands against other worst marketing stocks.
Overview of the Marketing Sector
The marketing and advertising industry is a vital part of our economy, playing multifaceted roles in facilitating market efficiency, nurturing creativity and innovation, and driving growth. According to a report by Solomon Partners, global advertising growth for 2024 is expected to fall between 4.6% and 7.2%. This amounts to nearly double the anticipated growth rate of 2%- 5% for 2023.
The Paris Olympics and impending US elections are the primary reasons behind this surge in growth anticipation. The report further highlights that out-of-home advertising is expected to have the highest ad spending growth year over year, at 7.2%. Digital ad spending takes the second spot, at 6.3%. On the other hand, print ad spending is expected to fall by 4.6% year over year.
Trends in the Marketing and Advertisement Sector
Macroeconomic improvement in the second half of 2023 and a positive economic outlook for 2024 are further expected to drive this growth. Inflation is also cooling down in 2024. In addition, the Federal Reserve cut interest rates recently by 0.5 percentage points. Since economic instability is typically cited as a primary reason behind advertisers’ spending cuts, the expectation of rising economic stability and growth is highly likely to fuel advertising spend.
A study by Dentsu revealed that the top twelve global markets are highly likely to increase their advertising spending by 13% as a percentage of GDP in 2024. This suggests that advertising spending exceeds macroeconomic growth.
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.
However, with the market becoming increasingly saturated with political content, the landscape is anticipated to become more challenging for non-political companies attempting to get their message across.
Artificial Intelligence and Marketing
Similar to other areas of life, AI is changing the marketing industry at unprecedented speed. According to a January 2024 Foundation AI Survey, nearly 84.8% of the marketing pros respondents claimed to use AI in their workplace. In addition, a significant majority said that they use AI to improve their performance on a daily basis. The most common usage of AI in the industry is content creation, as cited by around 87% respondents. Other popular applications of artificial intelligence among marketing respondents included keyword research (42%), email marketing (39%), social media (39%), and note-taking (36%). When asked about the importance of AI to their job, 32% voted in favor of it being “very” important. 33% claimed it to be “Moderately” important, while 9% said that it was “very” important.
According to a report by McKinsey, around 75% of the value delivered by generative AI use cases could fall across four key areas: marketing and sales, customer operations, software engineering, and R&D. A suitable marketing use case is the application of generative AI to generate creative content, including personalized emails. The measurable outcomes of this application are likely to slash the expenditure of generating such content, along with an increase in revenue by using specially curated creative content with high efficiency.
McKinsey identified 63 generative AI use cases across 16 business functions, calculating a total value of economic benefits in the range of $2.6 trillion and $4.4 trillion per annum when applied across industries. This is one of the primary reasons why marketers across the globe are scrambling to advance their AI capabilities. Marketers are increasingly leveraging AI-powered tools to personalize content for higher engagement, automate tasks, and expedite content generation, all adding to efficiency and cost-reduction.
Our Methodology
To list the 10 Worst Marketing Stocks to Buy, we used the Finviz screener, ETFs, and related articles to compile a list of 20 marketing stocks. Next, we narrowed our list of stocks by selecting those with high short percentage of float. Finally, we ranked the stocks in ascending order of their short % of float. We also included the number of hedge funds for each stock for additional insight.
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 Marketing Stocks to Buy
Thryv Holdings (NASDAQ:THRY)
Short % of Float: 6.9
No. of Hedge Funds as of Q2 2024: 18
Thryv Holdings (NASDAQ:THRY) is a marketing services and software company that serves small to medium-sized businesses (SMBs). It services more than 350,000 SMBs through four segments: Thryv US Marketing Services, Thryv US SaaS, Thryv International Marketing Services, and Thryv International SaaS.
The Thryv US Marketing Services segment encompasses its US digital and print solutions business. In contrast, the Thryv International Marketing Services segment includes its digital and print solutions business outside the US. More than 65,000 businesses use the company’s software as a service (SaaS) platform to manage their end-to-end operations. Its solutions allow SMB clients to execute daily operations, manage customer relationships, and generate new business leads. Its US SaaS segment covers its SaaS flagship all-in-one small business management platform in the US, while the International SaaS segment manages the same outside the country.
SaaS revenue in Q2 2024 increased by 25% year over year to $77.8 million, standing within the company’s guidance range. SaaS EBITDA significantly outperformed, experiencing a 60% year-over-year growth to $10 million, the highest point it has reached as a public company. The company also delivered strong subscriber growth, growing by 52% with 85,000 clients. It is also successfully upgrading its marketing services clients to its SaaS platform, highlighting the robust profitability model the company is running on.
Thryv (NASDAQ:THRY) also streamlined its sales process to incentivize and prioritize high-margin product sales while undertaking initiatives to boost spending from its existing customer base. As a result, SaaS subscribers grew to 85,000 in Q2 from 70,000 in Q1 fiscal 2024. This 21% sequential increase was achieved by continuously migrating marketing services clients to the SaaS platform.
A key factor driving the company’s success in this strategic transition is its recently launched marketing center. The center empowers businesses by managing their advertising campaigns, augmenting their online presence, and making insightful decisions backed by data. This product has proved highly effective in elevating the company’s market standing, positioning its clients for success in a digital-first world.
Its center strategy is continuing to take ground, as more than 10% of its current clients have two or more paid centers. This translates to a sequential growth of 200 basis points and a growth of 800 basis points from the same time last year. These trends show that more clients are benefitting from the company’s marketing center and experiencing tangible results in their business growth. The stock’s current price target of $18.84 implies an upside of 51.27%. It ranks second on our list of the worst marketing stocks to buy.
Laughing Water Capital stated the following regarding Thryv Holdings, Inc. (NASDAQ:THRY) in its Q2 2024 investor letter:
“Thryv Holdings, Inc. (NASDAQ:THRY) – Thryv, our growing SMB software business that is milking its declining Marketing Services business for cash flow, grew SAAS customers 30% YoY, increased full-year guidance, announced that seasoned net dollar retention improved by 300 bps, refinanced their debt on better terms, and initiated a share repurchase program during the quarter. These are all undeniably positive developments, but on the negative side of the ledger, the decline of their Marketing Services business has accelerated a touch, and shares have sold off sharply.
Last quarter, under separate cover I included a longer writeup on THRY where I explained what I think is happening under the surface at THRY with the Marketing Services business and the new Marketing Center SAAS product, and how I believe the economics of Marketing Center will prove to be wildly superior to the economics of the Marketing Services business. Thus far the market not only does not care, but in fact seems to be punishing THRY for what I believe will be a positive evolution of their business.
Management has indicated that revenue from the SAAS business will eclipse revenue from the Marketing Services business around this time next year, at which point THRY should start to trade more like the software business it is than the marketing business it was. Unsurprisingly, insiders at THRY once again bought shares in the quarter.”
Overall, THRY ranks second among the worst marketing stocks to buy now. While we acknowledge the potential of marketing 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 THRY but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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