Digital advertising stocks are underperforming, is it time to buy?
Oyour theme of Digital advertising actions – which includes internet platform players and ad technology players – has gone down a bit since our last update at the end of July. The chart is down about 16% year-to-date, underperforming the larger Nasdaq-100, which is up about 22% over the same period. However, now is probably a good time to take a look at the theme, as the age-old trend of marketers shifting ad budgets from traditional channels to digital channels is only expected to resume after Covid-19, as people spend more than time online. Additionally, with Covid proving more difficult to contain initial thought due to the emergence of new variants, the trend to work, learn and shop from home may continue, which bodes well for digital ad stocks.
In our theme, the owner of Google Alphabet (GOOG) – the largest provider of video and search ads on the Internet – has been the top performer, its share increasing by around 64% year-to-date. Social media titan Facebook (FB) has also performed well, with a 38% increase in its inventory since the start of the year. Both stocks have benefited from an increase in online ad spending and also the wider shift to value stocks as both stocks trade at low multiples of their growth rates. On the other hand, higher multiple growth names such as Roku (ROKU) and The Trade Desk (TTD) underperformed, falling by about 3% and 11%, respectively.
[7/28/2021] Google’s record quarter bodes well for digital advertising stocks
Our theme of Digital advertising actions – which includes digital ad platforms and ad technology players – has returned around 26% year-to-date, outperforming the broader Nasdaq-100, which is up around 18% over the same period. The theme is set to return to center stage, after a blistering quarter for Alphabet (GOOG) – the internet’s largest provider of video and search ads – which saw revenue increase 62% year-on-year to 61 , $ 9 billion, with net income up 266% to $ 18.5 billion in the second quarter, as marketers doubled their digital ad spend to target consumers who spent more than time online during the Covid-19 pandemic. Social media titan Facebook (FB) is also expected to release its numbers on Wednesday and we could see similar trends.
Alphabet remains the best performer within our theme, with inventory up around 56% year-to-date. On the other hand, Magnite (MGNI), an advertising technology company focused on the connected TV space, has seen its stock decline by about 1% since the start of the year.
[7/28/2021] Will digital ad stocks continue to outperform?
Our theme of Digital advertising actions – which includes digital ad platforms and ad technology players – has returned around 23% year-to-date, outperforming the broader Nasdaq-100, which is up around 13% during the same period. The theme is also up 184% since the end of 2019.
Unlike high-growth software and cloud stocks which have seen a correction this year, advertising players are doing well as businesses are likely to increase their ad budgets as the economy continues to open up after Covid . Additionally, marketers are likely to accelerate the shift of their ad budgets from traditional channels to digital channels, as customers may be more receptive to digital ads after the pandemic, which has seen people go online. for working, learning, shopping and entertainment. The global digital advertising market is expected to grow by around 20% this year to more than $ 450 billion in 2021, per eMarketer. Digital ad spend is expected to account for over 60% of overall media ad spend globally, down from just 46% three years ago. Below you will find a little more about the actions of our theme and their evolution this year.
Alphabet (GOOG), the parent company of Google, has been the best performer on our theme, with a 45% share increase since the start of the year. The gains are due to increased usage of Google properties thanks to blockages and strong performance from YouTube ads and cloud companies.
Roku (ROKU), a provider of hardware, software and streaming services, has been another big winner in the pandemic, its share increasing by 30% since the start of the year. Roku has seen its user base and engagement grow through lockdowns, with people being forced to stay home and rely on streaming and home entertainment options. Roku’s platform business – which includes its advertising business and media sales – saw revenue double year-over-year in the first quarter of 2021 to $ 466 million.
Facebook (FB) stock has gained around 25% year-to-date thanks to a higher number of active users on its social media sites and a growing shift to e-commerce, which benefits businesses. Facebook ad revenue. Revenue increased 48% from the first quarter of 2021 to approximately $ 26 billion.
Magnite (MGNI), an advertising technology company focused on the connected TV space, has seen its share increase by about 19% since the start of the year, thanks to strong quarterly results and a growing shift of advertising from linear television to digital streaming services.
The Trade Desk (TTD), a major demand-side advertising platform, has seen its shares fall by around 5% since the start of the year. The underperformance is in part due to Google’s plan to end the use of third-party tracking cookies in its market-leading Chrome browser, a move that investors say will have a temporary impact on market players. advertising technology.
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