Although the macroeconomy has been plagued by headwinds of persistent inflation, high-interest rates, and recessionary pressures, the advertising sector remains strong thanks to digital and smart advertising. Therefore, investors could look to buy fundamentally strong advertising stock WPP plc (WPP). However, it could be best to steer clear of Magnite, Inc. (MGNI) and Troika Media Group, Inc. (TRKA) due to their weak fundamentals.
The advertising industry is expected to remain resilient as long as the demand for advertising stays strong. Media companies needing to make their streaming businesses profitable are looking to lean heavily on advertising.
The growing popularity of self-service advertising platforms and the increase in the internet user base are driving the digital advertising market. The digital advertising market is expected to grow to $209.43 billion in 2027 at a CAGR of 3.1%.
Moreover, with the rise in artificial intelligence, machine learning, big data, and real-time bidding, smart advertising has allowed market players to target their consumers with higher efficiency, improving the campaigns' performance.
The global smart advertising market size is predicted to grow to around $1.87 trillion by 2030 at a CAGR of approximately 20.42%.
Accordingly, investors could look to buy or sell the featured advertising stocks. Let’s take a closer look at their fundamentals.
Stock to Buy:
WPP plc (WPP)
Based in London, the United Kingdom, WPP, a creative transformation company, provides communications, experience, commerce, and technology services worldwide. The company operates through three segments: Global Integrated Agencies, Public Relations, and Specialist Agencies.
In terms of the trailing-12-month EBIT margin, WPP’s 9.37% is 10% higher than the 8.52% industry average. Its 4.73% trailing-12-month net income margin is 78.8% higher than the 2.65% industry average. Likewise, its 18.71% trailing-12-month Return on Common Equity is 469.3% higher than the industry average of 3.29%.
WPP’s revenue for the fiscal year ended December 31, 2022, increased 12.7% year-over-year to £14.43 billion ($18.36 billion). The company’s gross profit increased 15.2% year-over-year to £2.54 billion ($3.23 billion). Additionally, its EPS came in at 61.20p, representing a 16.6% increase over the prior-year quarter.
Analysts expect WPP’s revenue for the quarter ending June 30, 2023, to increase 8.7% year-over-year to $3.85 billion. It has a commendable earnings surprise history, surpassing the consensus EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 32% to close the last trading session at $53.72.
WPP’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
Within the Advertising industry, it is ranked #4 out of 20 stocks. It has a B grade for Stability and Sentiment.
To see the additional ratings of WPP for Growth, Value, Momentum, and Quality, click here.
Stocks to Sell:
Magnite, Inc. (MGNI)
MGNI operates an independent sell-side advertising platform in the United States and internationally. The company's platform offers applications and services for sellers of digital advertising inventory or publishers to manage and monetize their inventory, and provides applications and services for buyers.
In terms of the trailing-12-month EBIT margin, MGNI’s negative 28.05% compares to the industry average of 8.52%. Its trailing-12-month net income margin of negative 31.3% compares to the industry average of 2.65%. Likewise, its negative 23.91% trailing-12-month Return on Common Equity compares to the 3.29% industry average.
MGNI’s non-GAAP income declined 49% year-over-year to $5.75 million for the fiscal first quarter that ended March 31, 2023. The company’s loss from operations widened 152.3% year-over-year to $100.50 million. In addition, its adjusted EBITDA declined 19.1% year-over-year to $23.34 million. Its non-GAAP EPS came in at $0.04, representing a 50% decline over the prior-year quarter.
Over the past month, the stock has gained 12.2% to close the last trading session at $13.22.
MGNI’s POWR Ratings reflect its bleak prospects. It has an overall rating of D, equating to a Sell in our proprietary rating system. The stock is ranked #17 in the same industry.
The stock has a D grade for Momentum and Stability. Click here to see the additional ratings of MGNI for Growth, Value, Sentiment, and Quality.
Troika Media Group, Inc. (TRKA)
TRKA, a professional services company, provides consulting services and solutions worldwide. It offers brand building and activation, marketing innovation and enterprise technology, performance and customer acquisition, and internal and external creative, technical or media-based resources, among other services.
In terms of the trailing-12-month net income margin, TRKA’s negative 3.02% compares to the industry average of 2.65%. Its trailing-12-month Return on Common Equity of negative 227.56% compares to the industry average of 3.29%. Likewise, its negative 7.74% trailing-12-month Return on Total Assets compares to the 1.48% industry average.
For the fiscal quarter ended March 31, 2023, TRKA’s operating loss narrowed 67.3% year-over-year to $4.47 million. In addition, its net loss narrowed 45.1% year-over-year to $7.90 million.
Over the past year, the stock has fallen 90.5% to close the last trading session at $2.03.
The stock has an overall rating of D, equating to a Sell in our proprietary rating system. It is ranked #16 in the Advertising industry. The stock has a D grade for Stability and Sentiment. For additional ratings of TRKA for Growth, Value, Momentum, and Quality, click here.
What To Do Next?
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WPP shares were trading at $53.76 per share on Tuesday morning, up $0.04 (+0.07%). Year-to-date, WPP has gained 12.33%, versus a 13.96% rise in the benchmark S&P 500 index during the same period.
About the Author: Malaika Alphonsus
Malaika's passion for writing and interest in financial markets led her to pursue a career in investment research. With a degree in Economics and Psychology, she intends to assist investors in making informed investment decisions.
1 Advertising Stock to Buy Today, 2 to Sell StockNews.com
