In this artice, we will look at the 8 Worst AdTech Stocks To Buy Now. Let’s look at where Meta Platforms, Inc. (META) 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
Meta Platforms, Inc. (NASDAQ:META)
Short Interest: 1.31%
Number of Hedge Fund Holders: 219
Meta (NASDAQ:META) ranks seventh on our list of the worst adtech stocks to buy now, and is one of the leaders in the domain. The company builds technology that allows people to connect, find communities, share, and grow their businesses. Its products help people do all of this by connecting through personal computers, mobile devices, virtual reality (VR) and mixed reality (MR) headsets, and wearables. Advertisers also use the company’s apps to expand their customer base and connect with customers
Meta (NASDAQ:META) operates through two primary segments: Reality Labs (RL) and the Family of Apps (FoA). The RL segment includes mixed, augmented, and virtual reality-associated consumer software, hardware, and content. In contrast, the FoA segment includes globally famous apps: Instagram, Facebook, Messenger, WhatsApp, and Threads.
According to the company’s estimations, more than 3.2 billion people use at least one of Meta’s (NASDAQ:META) apps daily. This growth is especially strong in the US, where WhatsApp now serves more than 100 million monthly active users. Year-over-year growth across Instagram, Facebook, and Threads is also strong, both in the US and across the globe. Threads is also on the path to hit 200 million monthly active users, thereby establishing itself as another major social app. These trends are primarily driven by the company’s shift in focus towards users aged between 18 and 29.
Jumping on the AI bandwagon, Meta (NASDAQ:META) has plans to significantly modify its services for advertisers by employing artificial intelligence in the future. Advertisers who previously came to the company with a particular pre-selected target age group, interest, or geography would no longer need to do so, as Meta’s (NASDAQ:META) AI-enabled ad systems would soon be better equipped to predict target segments. In the future, Meta (NASDAQ:META) expects to hand over the task of generating creatives for advertisements to AI as well, leaving advertisers to only contact the company with a budget and a vision.
On September 10, Meta (NASDAQ:META) was initiated with a Buy at DA Davidson. Its median price target of $524.6 implies an upside of 9.60%. 219 hedge funds hold stakes in the stock, with Citadel Investment Group holding the highest stake, worth $6.26 billion.
Alger Focus Equity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising, which accounts for over 95% of its total revenue, evenly split between North American and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than-expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
Overall, META ranks seventh 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 META but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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