We recently compiled a list of the 15 Best Advertising Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Criteo S.A. (NASDAQ:CRTO) stands against the other advertising stocks.
Ad spending in 2024 received a significant boost from recurring events such as the US election and the Olympics, and experts believe that these spending patterns are likely to add billions to the market. Media agency Magna increased its US ad spending forecast for the year, expecting revenue growth of 11.4% to $377 billion, per the news shared with Marketing Dive. The company expects non-cyclical ad spending to grow by 8.9%, reflecting a rise from 8.2% in previous forecasts. This marks one of the best performances for the category in 20 years. This revision stemmed from improved macroeconomic conditions, healthy appetites in digital and streaming, and cyclical events, such as the elections and the Summer Olympics.
Advertising To Top US$1 trillion in 2026, Says PwC
As per PwC, fueling revenue growth by selling E&M products directly to users is challenging. Of the 3 major categories i.e., consumer spending, connectivity, and advertising, consumer spending is the smallest and slowest growing. The connectivity category i.e., fixed and mobile services, topped US$1.1 trillion in 2023. Advertising outpaced consumer spending in 2023 and should top US$1 trillion in 2026. PwC believes that it is expected to grow at a 6.7% CAGR through 2028.
With advertising expected to make up ~55% of total E&M industry growth over the upcoming 5 years, PwC believes that it will become a more important part of companies’ business models. For strategic reasons, all participants in the E&M industry are required to be more skillful at selling ads.
According to PwC, the changes to the way businesses approach the ad business are expected to be seen in 3 key areas. Firstly, the monetization of data is expected to fuel more sophisticated advertising models. Next, the connection will be closer between the discovery of products and services and their purchase and consumption. Finally, it will be important for companies to understand how global privacy regulations impact growth.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Trends To Watch Out for in 2025
As per Mediatool, key advertising trends to look out for include an emphasis on authenticity, visual content domination, integration of AI, mobile-centric campaigns, and growth of social commerce. AI/ML has become important in the world of digital advertising. As of now, 32% of marketers leverage AI for creating, managing, and optimizing their ads. According to Market.us, the global AI in advertising market is expected to reach $28.4 billion in the year 2033 with a CAGR of 28.4%. This was valued at $6.7 billion in the year 2023. Based on the application, targeted advertising dominated the broader market with a share of 31.1% in 2023.
Our Methodology
To list the 15 Best Advertising Stocks to Buy According to Hedge Funds, we used a screener and sifted through several online rankings. After getting the initial list of 25-28 stocks, we selected the ones having high hedge fund holdings. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with 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).
A graphic designer in front of a computer rendering a cutting edge digital advertisement for the company.
Criteo S.A. (NASDAQ:CRTO)
Number of Hedge Fund Holders: 21
Criteo S.A. (NASDAQ:CRTO) offers marketing and monetization services on the open Internet in North and South America and internationally.
The company’s platform allows retailers to monetize their digital properties effectively while giving advertisers access to valuable consumer data and targeting capabilities. Wall Street analysts believe that Criteo S.A. (NASDAQ:CRTO)’s unique dataset and capabilities are expected to drive future growth. The company’s vast dataset, including insights from over $950 billion in annual e-commerce sales, offers a significant competitive advantage in the digital advertising space. This rich data repository allows Criteo S.A. (NASDAQ:CRTO) to provide highly targeted and effective advertising solutions, potentially resulting in increased returns on investment for its clients.
The company’s AI-driven tools and deep targeting experience further improve its ability to leverage this dataset effectively. With the evolution of privacy regulations and phasing out of third-party cookies, Criteo S.A. (NASDAQ:CRTO)’s first-party data and advanced targeting capabilities should become increasingly valuable to advertisers who seek effective ways to reach their target audiences.
As per Wall Street, Criteo S.A. (NASDAQ:CRTO)’s unique dataset and nascent opportunities in social media advertising are expected to act as positive drivers for future growth.
ClearBridge Investments, an investment management company, released its Q2 2024 investor letter. Here is what the fund said:
“New positions in the quarter were from a variety of sectors. Criteo S.A. (NASDAQ:CRTO), in the communication services sector, provides digital advertising technologies that help drive clients’ e-commerce businesses. While the company was previously reliant on third-party cookies to help optimize its products, management has spent the past five years pivoting away from this technology and focusing on building a leading presence in the burgeoning retail media space. We believe this transformation has reached a tipping point, and that the inherent growth opportunities in this new end market represent a higher growth rate then is currently reflected in the company’s valuation.”
Overall CRTO ranks 3rd on our list of the best advertising stocks to buy according to hedge funds. While we acknowledge the potential of CRTO as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than CRTO but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.