In this artice, we will look at the 8 Worst AdTech Stocks To Buy Now. Let’s look at where The Trade Desk, Inc. (TTD) stands against other worst adtech stocks.
Overview of the AdTech Industry
The adtech industry includes an array of products and companies, including supply-side platforms (SSPs), demand-side platforms (DSPs), data management platforms (DMPs), ad exchanges, and more. According to data by Allied Market Research, the global adtech market stood at $748.2 billion in 2021, and is anticipated to reach $2.9 trillion by 2031. This translates to a compound annual growth rate of 14.7% between 2022 and 2031. Experts believe that the industry is well-poised for growth, with the global supply-side platform segment (SS) reaching a market size of $117.32 billion by 2033. Technological advancements, supportive government policies, and higher consumer demand are all factors expected to drive this growth.
In addition, changing trends such as the exponentially growing use of advanced technology like artificial intelligence and machine learning, growing Internet and digital penetration, growth of social media platforms and better prospects for the gaming industry, are all responsible for this growth. In-app advertising, interactive ads, and higher use of connected TV (CTV) have become the dominant trends in the AdTech industry, driving growth and change.
Trends in programmatic advertising are also expected to improve, allowing the demand-side platform software market size to reach $120.1 billion by 2033. The demand for improved targeting and measurement capabilities for online ads is also an important factor to consider in this growth. While the AdTech industry seems promising on its own, the increasing use of artificial intelligence across all platforms is making it even more appealing.
Recent Happenings in the AdTech Sector
Despite its positive trends, the AdTech industry in the US is experiencing certain headwinds, the most prominent being Google’s highly profitable AdTech business going to trial. The Department of Justice and a coalition of states filed a lawsuit against the company in 2023, claiming that the company is illegally dominating the digital ad marketplace, leveraging its market power to suppress competition and innovation. A trial began this month, and the Department of Justice rested its case against its parent company for operating a monopoly in the AdTech market. The tech giant earned more than $200 billion through the placing and selling of ads in 2023, arguing that the reason behind this success is the “effectiveness” of its services. Prosecutors, however, claim that the company has used its dominance to shun rivals.
In addition, smaller AdTech firms are raising concerns over Google’s cookies alternative, Privacy Sandbox. While its ad business is under global scrutiny, the company is making adapting to Privacy Sandbox a critical necessity. However, regulators in the US and UK are of the opinion that the Privacy Sandbox would give Google the lion’s share of control over the digital advertising market, which might negatively affect competition.
Potential technology development delays seem to be negatively affecting smaller AdTech firms, changing the course of the industry. While conclusive results aren’t out, such changes are highly likely to alter AdTech industry trends.
Our Methodology
To list the 8 Worst AdTech Stocks To Buy Now, we used the Finviz screener, ETFs, and rankings to first identify 15 AdTech stocks. Next, we narrowed our list by selecting the 8 stocks that have high short interest but also a high number of hedge fund investors. Finally, these stocks were ranked in ascending order of their short interest. We have also added the number of hedge funds holding each stock as a secondary metric.
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).
8 Worst AdTech Stocks To Buy Now
The Trade Desk, Inc. (NASDAQ:TTD)
Short Interest: 2.11%
Number of Hedge Fund Holders: 46
The Trade Desk (NASDAQ:TTD) offers its customers a self-service, cloud-based ad-buying platform where clients can plan, optimize, manage, and measure data-driven digital advertising campaigns. The company’s platform allows clients to undertake integrated campaigns across channels and ad formats, including television (CTV), audio, display, native and social, and digital-out-of-home, on a variety of devices. These may include mobile devices, computers, streaming devices, and television.
The Trade Desk’s (NASDAQ:TTD) platform also offers integrated access to a variety of data sources and omnichannel inventory, along with third-party services. Ad buyers collaborating with the company can use its platform’s integrations with publishers, inventory, and data partners for decision qualities and reach. Its enterprise application programming interfaces (APIs) also allow clients to expand and personalize platform functionality as per their preference. The Trade Desk (NASDAQ:TTD) typically collaborates with advertisers, advertising agencies, and other service providers working for advertisers or agencies.
The company delivered strong growth in Q2 2024, continuing its profitability trends. Revenue grew by 26% to $585 million, significantly surpassing the overall growth rate of the rest of the digital marketing industry. It is on a solid path of growth, success, and profitability, boosted by consistent 20%+ revenue growth year after year for the past several years. These trends make the company likely to outpace the market in the future, supported by significant growth areas such as connected TV.
The Trade Desk (NASDAQ:TTD) is helping advertisers think about efficacy from an out-of-the-box perspective, another reason behind its growing popularity. To help advertisers leverage the premium open Internet, the company has launched Kokai, its most ambitious platform since its inception. Kokai enables clients to employ data about their most loyal group of customers, using it as a starting point for attracting the next group of loyal customers. The platform guides clients in targeting these new customers across the thousands of destinations that make up the premium layer of the open Internet.
Kokai also employs AI to help customers understand the approximately 15 million ad opportunities that crop up every second and the several hundred variables associated with them. These processes can be streamlined according to a company’s particular business growth objectives, further solidifying Kokai’s efficiency. The platform’s early results have been encouraging, with the campaigns holding an incremental reach of more than 70% after moving to Kokai.
Performance metrics across the company have also improved by 25%, helping it unlock performance budgets for several years. This translates to more cost-efficient and precise clients. The company’s profitable business model gives it the flexibility to make investments, continuously driving growth and innovation in the long term. On September 13, Wedbush raised the stock’s price target to $115 from $110. Its current price target of $106.06 implies an upside of 8.43%.
Overall, TTD ranks fourth among the worst adtech stocks to buy now. While we acknowledge the potential of adtech 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 TTD but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
Disclosure: None. Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily e-newsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below.
