The growing popularity of personal electronics like computers, smartphones, and televisions bodes well for the advertising industry. Businesses around the world use AdTech companies to reach their target audience efficiently.
As long as companies understand the value of delivering customized advertisements to interested audiences, there will be a demand for cutting-edge advertising tools. AdTech companies are essential and thus help businesses and startups run profitable advertising campaigns.
Amid this backdrop, it could be wise to add fundamentally strong advertising stocks Ziff Davis, Inc. (ZD), Criteo S.A. (CRTO), and Cimpress plc (CMPR) to one’s watchlist.
Before diving deeper into the fundamentals of these stocks, let’s discuss why the advertising industry is well-positioned for growth.
Worldwide digital ad spending saw growth slow to 8.6% last year to $567.49 billion after years of double-digit increases. However, worldwide digital ad spending is expected to grow 10.5% this year, reaching $626.86 billion.
Additionally, Magna expects the global advertising market to grow in 2023, driven by retail media and social media rebounding. Advertising revenues for media owners are predicted to reach $842 billion in 2023, increasing 4.6% year-over-year, supported by e-commerce and retail media.
While traditional TV and editorial media companies’ ad sales are predicted to fall this year, digital pure-play ad sales and retail media networks are expected to rise. 69% of all ad sales, or $577 billion, will be made up of digital pure-play advertising sales, increasing by 8.5%, driven by e-commerce, retail media, and changes in media consumption habits.
The global advertising market is expected to grow at a CAGR of 5.2% to reach $834.90 billion by 2028.
Considering these factors, it could be wise to add these stocks to one’s watchlist. Let’s take a closer look at their fundamentals.
Ziff Davis, Inc. (ZD)
ZD provides internet information and services. It operates in two segments: Digital Media and Cybersecurity and Martech.
In terms of the trailing-12-month EBITDA margin, ZD’s 32.42% is 79.6% higher than the 18.05% industry average. Likewise, its 20.89% trailing-12-month levered FCF margin is 184.2% higher than the 7.35% industry average. Furthermore, the stock’s 7.64% trailing-12-month Capex/Sales is 90.4% higher than the 4.01% industry average.
On June 4, 2023, ZD announced the completion of an acquisition, expanding its global customer base, accessing new markets, and expanding its product lineup. The acquisition includes Lifehacker (asset) in the technology sector in the USA.
ZD’s total revenues for the first quarter ended March 31, 2023, came in at $307.14 million. Its adjusted net income came in at $51.73 million, while its adjusted EBITDA came in at $94.33 million. The company’s adjusted EPS came in at $1.10.
Street expects ZD’s EPS for the quarter ending December 31, 2023, to increase 5% year-over-year to $2.37. Its revenue for the quarter ending September 30, 2023, is expected to increase 0.8% year-over-year to $344.70 million. It surpassed the Street EPS estimates in three of the trailing four quarters. Over the past month, the stock has gained 3.8% to close the last trading session at $65.91.
ZD’s POWR Ratings reflect strong prospects. It has an overall rating of B, which translates to a Buy in our proprietary system. The POWR ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #3 out of 20 stocks in the Advertising industry. It has a B grade for Growth and Quality. Click here to see ZD’s ratings for Value, Momentum, Stability, and Sentiment.
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 platform,
On June 15, 2023, CRTO launched Commerce Grid, a unique supply-side platform (SSP) designed for agencies and publishers looking to connect media and commerce with programmatic. CRTO’s Chief Revenue Officer Brian Gleason said, “Commerce Grid is another milestone in our transformational roadmap, enabling our existing and future clients to engage in the massive commerce media opportunity.”
McKinsey predicts that commerce media could generate $1.3 trillion in enterprise value by 2026, with $50 billion available to publishers in the United States alone. Given the huge scope of commerce media, CRTO will likely to benefit from it.
On March 7, 2023, CRTO acquired Brandcrush to offer a comprehensive omnichannel monetization solution globally. This enables retailers to manage media inventory across e-commerce and physical stores while allowing brands and agencies to purchase omnichannel media from top retailers.
The acquisition strengthens Criteo’s presence in the Asia-Pacific retail media market and will solidify its global leadership in retail media.
In terms of the trailing-12-month levered FCF margin, CRTO’s 12.27% is 67% higher than the 7.35% industry average. Likewise, its 5.69% trailing-12-month Capex/Sales is 41.9% higher than the 4.01% industry average. Furthermore, the stock’s 0.95x trailing-12-month asset turnover ratio is 92.7% higher than the 0.49x industry average.
For the fiscal first quarter ended March 31, 2023, CRTO’s total revenues came in at $445 million. Its gross profit came in at $182 million. Also, its adjusted EPS came in at $0.46. Additionally, the company’s adjusted EBITDA came in at $39 million.
Analysts expect CRTO’s EPS for the quarter ending September 30, 2023, to increase 5.1% year-over-year to $0.56. Also, its revenue for the quarter ending June 30, 2023, is expected to increase 7.7% year-over-year to $230.99 million. It surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 36% to close the last trading session at $33.34.
CRTO’s positive outlook is reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Value and a B for Sentiment. It is ranked #2 in the same industry. To see CRTO’s ratings for Growth, Momentum, Stability, and Quality, click here.
Cimpress plc (CMPR)
Headquartered in Dundalk, Ireland, CMPR provides various mass customization of printing and related products. The company operates through five segments: Vistaprint, Print Brothers, The Print Group, National Pen, and All Other Businesses. It offers printed and digital marketing products; internet-based canvas-print wall décor, business signage, and other printed products; business cards.
In terms of the trailing-12-month gross profit margin, CMPR’s 46.56% is 56% higher than the 29.85% industry average. Likewise, its 1.50x asset turnover ratio is 87.3% higher than the 0.80x industry average.
CMPR’s total revenues for the third quarter ended March 31, 2023, increased 12.9% year-over-year to $742.16 million. Its net cash provided by operating activities came in at $12.60 million, compared to net cash used in operating activities of $48.20 million. Its adjusted EBITDA rose 105.7% over the prior-year quarter to $69.15 million.
For the quarter ending June 30, 2023, CMPR’s revenue is expected to increase 9.8% year-over-year to $793.45 million. Over the past nine months, the stock has gained 105.4% to close the last trading session at $53.42.
CMPR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value and Quality. Within the Advertising industry, it is ranked first. To see CMPR’s rating for Momentum, Stability, and Sentiment, click here.
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ZD shares were trading at $65.92 per share on Thursday morning, up $0.01 (+0.02%). Year-to-date, ZD has declined -16.66%, versus a 14.58% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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