The digital advertising market is experiencing strong growth due to increasing emphasis on businesses' online presence and digital branding. Therefore, we look into sound digital advertising space, such as Alphabet Inc. (GOOGL), Meta Platforms, Inc. (META), and The Trade Desk, Inc. (TTD).
The ongoing shift from traditional to online advertising has been a significant driver of the growth of the online advertising market. With the widespread adoption of smartphones and the rise of social media platforms, people spend more time online for work, entertainment, or socializing, allowing advertisers to reach them through digital channels.
Moreover, the internet has significantly enhanced convenience and accessibility, bringing the entire world to users' fingertips. Hence, the U.S. digital ad spending market is anticipated to be worth around $377.19 billion by 2033, poised to grow at a CAGR of 10.2% from 2024 to 2033.
Thus, keeping the immense potential of digitization in mind, let us dig deeper into the fundamentals of the leading companies in the digital advertising space in detail:
Alphabet Inc. (GOOGL)
GOOGL is the powerhouse behind a spectrum of tech innovations and platforms worldwide. Its segments, spanning Google Services; Google Cloud; and Other Bets; cater to diverse digital needs and aspirations.
Like other Big Tech companies, GOOGL has been investing in artificial intelligence, a strategy that has helped drive demand for its cloud services. The company also offers internet services, subscription-based products, apps and in-app purchases, and licensing and research and development services.
On May 2, 2024, GOOGL and MongoDB, Inc. (MDB) collaborated to optimize Gemini Code Assist and provide enhanced suggestions for application development and modernization on MDB. MDB is the industry-leading developer data platform that millions of developers and tens of thousands of customers rely on every day for business-critical applications.
Through this collaboration, Gemini Code Assist can help developers get answers and information about MongoDB code, documentation, and best practices so they can more quickly prototype new features and accelerate application development.
GOOGL’s trailing-12-month EBIT margin of 31.03% is 227.3% higher than the industry average of 9.48%. Its trailing-12-month Return on Total Capital of 20.34% is 440.6% higher than the industry average of 3.76%. Also, its 13.40% trailing-12-month levered FCF margin is 59.1% higher than the industry average of 8.42%.
During the second quarter, which ended June 30, 2024, GOOGL saw robust growth, with revenues rising 13.6% year-over-year to $84.74 billion. Income from operations surged by 25.8% from the year-ago quarter to $27.43 billion, while net income soared to $23.62 billion, marking a 28.6% increase from the prior year’s quarter. Earnings per share for Class A, B, and C stock reached $1.91, up by 31.7% year-over-year.
For the quarter ending September 24, GOOGL’s revenue is expected to increase 12.5% year-over-year to $86.26 billion. Its EPS is expected to grow 18.1% year-over-year to $1.83. Moreover, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
GOOGL’s stock has soared 31.2% over the past year to close the last trading session at $167.18.
GOOGL’s POWR Ratings reflect this positive outlook. It has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Sentiment and a B for Stability and Quality. It is ranked #9 in the 51-stock B-rated Internet industry.
Beyond what is stated above, we’ve also rated GOOGL for Momentum, Growth, and Value. Get all GOOGL ratings here.
Meta Platforms, Inc. (META)
META engages in the development of products that enable people to connect and share with friends and family through mobile devices, personal computers, virtual reality headsets, and wearables worldwide. It operates in two segments, Family of Apps and Reality Labs.
META’s trailing-12-month EBIT margin of 41.21% is 334.7% higher than the industry average of 9.48%. Its trailing-12-month Return on Total Capital of 21.10% is 460.7% higher than the industry average of 3.76%. Also, its 35.37% trailing-12-month levered FCF margin is 828.6% higher than the industry average of 3.81%.
For the second quarter that ended June 30, 2024, META’s revenue increased 22% year-over-year to $39.07 billion. The company’s net income came in at $13.47 billion or $5.16 per share, up 73% and 73% from the previous year’s quarter, respectively.
Analysts expect META’s revenue and EPS for the third quarter (ending September 2024) to increase 17.5% and 19.1% year-over-year to $40.11 billion and $5.23, respectively. Also, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
META’s shares have gained 11.7% over the past six months and 86% over the past year to close the last trading session at $526.73.
META’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It has an A grade for Quality and Sentiment. The stock is ranked #16 out of 51 stocks in the Internet industry.
Click here to access the additional META ratings (Value, Momentum, and Stability).
The Trade Desk, Inc. (TTD)
TTD operates as a technology company in the United States and internationally. The company offers a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels.
TTD’s trailing-12-month EBIT margin of 14.05% is 48.2% higher than the industry average of 9.48%. Its trailing-12-month Return on Total Capital of 19.82% is 452% higher than the industry average of 3.59%. Also, its 25.24% trailing-12-month levered FCF margin is 199.7% higher than the industry average of 8.42%.
During the second quarter, which ended June 30, 2024, TTD saw robust growth, with revenue rising 13.6% year-over-year to $585 million. Adjusted EBITDA surged by 34.4% from the year-ago quarter to $242 million, while its non-GAAP net income soared to $197 million, marking a 41.7% increase from the prior year’s quarter. Non-GAAP earnings per share reached $0.39, up by 39.3% year-over-year.
For the quarter ending September 24, TTD’s revenue is expected to increase 25.6% year-over-year to $619.29 million. Its EPS is expected to grow 18.6% year-over-year to $0.39. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.
TTD’s stock has soared 23.7% over the past six months to close the last trading session at $102.14.
TTD’s POWR Ratings reflect bright prospects. The stock has an A grade for Growth and Quality and a B for Sentiment. It is ranked #51 in the 129-stock Software - Application industry.
Beyond what is stated above, we’ve also rated TTD for Momentum, Stability, and Value. Get all TTD ratings here.
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GOOGL shares were trading at $165.54 per share on Wednesday afternoon, down $1.64 (-0.98%). Year-to-date, GOOGL has gained 18.64%, versus a 18.56% rise in the benchmark S&P 500 index during the same period.
About the Author: Nidhi Agarwal
Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities.
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