The advertising industry is growing rapidly due to the increasing popularity of personal electronics such as computers and smartphones, the rise of e-commerce, the integration of AI and data analytics in marketing strategies, and major global events drawing large audiences. Amid this backdrop, investors might consider buying high-growth advertising stocks Taboola.com Ltd. (TBLA) and Criteo S.A. (CRTO).
Businesses worldwide rely on AdTech companies to effectively reach their target markets. The rise of the internet, social media, and streaming has significantly boosted in-stream ads, generating substantial revenue. Statista projects the global ad spending in the digital advertising market to reach $740.3 billion this year.
Furthermore, Magna forecasts that U.S. ad spending will grow to $374 billion in 2024, an 11% increase year-over-year, and the global ad market will reach $927 billion, up 10%. This growth is driven by a stronger-than-expected first quarter, an improved economic outlook, and several major global events such as sports tournaments and elections.
Considering these conducive trends, let's analyze the fundamental aspects of the two Advertising picks mentioned above, starting with the second choice.
Stock #2: Taboola.com Ltd. (TBLA)
TBLA and its subsidiaries operate an artificial intelligence-based algorithmic engine platform internationally. It offers Taboola, a platform that partners with websites, devices, and mobile apps to recommend editorial content and advertisements on the open web to users.
TBLA's Total Assets grew at a CAGR of 43.8% over the past three years. Similarly, its revenue grew at a CAGR of 8% during the same period.
In terms of the trailing-12-month asset turnover ratio, TBLA's 0.89x is 77.5% higher than the 0.50x industry average.
For the first quarter that ended March 31, 2024, TBLA's revenues increased 26.3% year-over-year to $414 million. Its ex-TAC gross profit rose 20% from the year-ago value to $138.89 million. Moreover, the company's non-GAAP net income stood at $3.83 million, compared to a non-GAAP net loss of $4.10 million in the year-ago quarter, while adjusted EBITDA rose by 132.1% year-over-year to $23.49 million.
Analysts expect TBLA's revenue for the quarter ended June 30, 2024, to increase 28.7% year-over-year to $427.23 million. Its EPS for the quarter ending September 30, 2024, is expected to increase 413.2% year-over-year to $0.10. Over the past year, the stock has gained 5.4% to close the last trading session at $3.41.
TBLA's POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, and Sentiment. It is ranked #3 out of 16 stocks in the B-rated Advertising industry. Beyond what we stated above, we also have given TBLA grades for Momentum, Stability, and Quality. Get all the TBLA's ratings here.
Stock #1: Criteo S.A. (CRTO)
Headquartered in Paris, France, CRTO provides marketing and monetization services on the open Internet in North and South America, Europe, the Middle East, Africa, and the Asia-Pacific. The company's Criteo Shopper Graph, derives clients' proprietary commerce data. It also offers Criteo AI Engine solutions as well as fast data collection and retrieval; and experimentation platforms.
On June 18, 2024, CRTO announced a strategic partnership with Euronics Italia S.p.A. to enhance its Retail Media offerings. This collaboration integrates CRTO's advanced technology into Euronics' e-commerce platform, enabling targeted advertising solutions and enhancing customer shopping experiences through personalized ads and sponsored product placements across various site locations.
On June 4, 2024, CRTO partnered with Uber UK to launch Sponsored Items on Uber Eats, enhancing FMCG brand visibility directly within the app across 12 markets. Powered by CRTO, this new advertising surface aims to improve customer engagement and drive value for brands and Uber Eats by promoting relevant products during the shopping experience.
CRTO's total assets grew at a CAGR of 7.4% over the past three years.
In terms of the trailing-12-month net income margin, CRTO's 3.70% is 29.9% higher than the 2.85% industry average. Likewise, its 3.28% trailing-12-month Return on Total Assets is 169.2% higher than the 1.22% industry average. Furthermore, the stock's 7.27% trailing-12-month Return on Total Capital is 103.2% higher than the 3.58% industry average.
CRTO's revenue for the fiscal first quarter ended March 31, 2024, increased marginally year-over-year to $450.01 million. Its adjusted EBITDA grew 82.5% over the prior-year quarter to $70.68 million.
For the same period, CRTO's adjusted net income and EPS rose 69.5% and 60% from the year-ago value to $47.49 million and $0.80, respectively.
For the quarter ended June 30, 2024, CRTO's revenue is expected to increase 9.7% year-over-year to $263.44 million. Its EPS for the same quarter is expected to increase 56.2% year-over-year to $0.77. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 13.7% to close the last trading session at $38.01.
CRTO's POWR Ratings reflect a favorable outlook. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system.
CRTO has an A grade for Growth and Value and a B for Sentiment. It is ranked #2 in the Advertising industry. To see CRTO's Momentum, Stability, and Quality ratings, click here.
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CRTO shares were trading at $37.95 per share on Monday afternoon, up $0.23 (+0.61%). Year-to-date, CRTO has gained 49.88%, versus a 15.40% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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