As the fast-paced economic recovery feeds the advertising operations of recovering businesses, the advertising sector has been witnessing steady growth. Furthermore, because consumers are spending more time at home and consuming more digital content, there has been a significant increase in e-commerce and social media usage, propelling the growth of digital advertising.
Driven by rapid technological advancements, rising urbanization, increasing adoption of 5G networks, and IoT, the global digital advertising market is projected to reach $1,065.8 billion by 2031, growing at a 10.3% CAGR.
Therefore, we think it could be wise to invest in fundamentally sound advertising stocks Publicis Groupe S.A. (PUBGY), Criteo S.A. (CRTO), Cimpress plc (CMPR), and Tremor International Ltd (TRMR) to cash in on the industry tailwinds.
Publicis Groupe S.A. (PUBGY)
Headquartered in Paris, France, PUBGY offers communication value chain, consulting, execution, marketing, and digital business transformation services. It functions as an advertising agency that offers billboard, television, radio, and press advertising services under the Publicis Worldwide, Saatchi & Saatchi, Leo Burnett, Marcel, Fallon, and BBH brands.
In January, PUBGY announced the acquisition of Tremend, one of the fastest growing and largest independent software engineering companies in Central and Eastern Europe. Tremend will serve as the latest global delivery center for Publicis Sapient. Its proven technology has reached 60 million of its clients' end-users. The acquisition of Tremend should be a powerful expansion of PUBGY's global distributed delivery model and engineering capabilities and diversify its geographic footprint.
Last December, PUBGY announced the launch of the largest fintech entity in Southeast Asia, SCB Tech X, a joint venture between Publicis Sapient and Siam Commercial Bank (SCB). SCB Tech X is a trustworthy cloud-native industry-leading platform-as-a-service business that will serve clients throughout Southeast Asia where digital payments are predicted to exceed US$1 trillion in transaction value by 2025.
PUBGY's revenue increased 8.8% year-over-year to €11.74 billion ($13 billion) for its fiscal year 2021. Its operating income grew 45.9% from the prior-year quarter to €1.43 billion ($1.58 billion). And the company's net income surged 81.4% from its year-ago value to €1.03 billion ($1.14 billion), while its EPS grew 17.6% year-over-year to €5.02.
Analysts expect PUBGY's revenue to increase 5.5% year-over-year to $12.64 billion in its fiscal year 2022. The $1.51 consensus EPS estimate represents 6.4% year-over-year growth in its fiscal year 2022.
PUBGY's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
PUBGY has also rated B for Stability. Within the Advertising industry, it is ranked #5 of 20 stocks.
Beyond what we've stated above, we have also given PUBGY's grades for Growth, Value, Quality, Momentum, and Sentiment. Get all the PUBGY ratings here.
Criteo S.A. (CRTO)
Headquartered in Paris, France, CRTO provides marketing and monetization services on the open Internet in America, Europe, the Middle East, Africa, and the Asia-Pacific. The company's Criteo Shopper Graph obtains clients' proprietary commerce data, such as transaction activity on their digital properties. The Criteo AI engine’s solutions include lookalike finder, recommendation, and predictive bidding algorithms.
Last month, CRTO announced a retail media advertising partnership with Michaels, a leading specialty arts and crafts retailer in North America. The brands and agencies connected to CRTO's retail media platform and ecosystem could attract Michaels' loyal customer base, improving the shopping experience and exploring relevant products through non-interrupting advertising, while driving new revenue streams for the retailer.
Last December, CRTO announced its strategic acquisition of IPONWEB, a market leading AdTech company with world-class media trading capabilities. The acquisition should enable CRTO to expedite its Commerce Media Platform vision to provide better control to its enterprise marketers and their agency partners by leveraging IPONWEB's well-established DSP and SSP solutions.
In the fourth quarter, ended Dec. 31, 2021, CRTO's revenue amounted to $653 million. Its operating income came in at $65.74 million, while its net income increased 60% year-over-year to $74.94. The company's EPS increased 57.5% year-over-year to $1.15.
The consensus EPS estimate for the third quarter ended March 31, 2022, represents a 9.1% improvement year-over-year to $0.70. Analysts expect its revenue to increase 3.1% year-over-year to $220.00 million for the first quarter, ending March 31, 2022. Furthermore, it has an impressive earnings surprise history; it surpassed the consensus EPS estimates in all the trailing four quarters.
CRTO's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Value and Quality. In the Advertising industry, it is ranked #3.
In total, we rate CRTO on eight different levels. Beyond what we've stated above, we have also given CRTO's grades for Growth, Stability, Momentum, and Sentiment. Get all the CRTO ratings here.
Cimpress plc (CMPR)
CMPR offers various mass customization services worldwide and has five operational segments: Vistaprint; PrintBrothers; The Print Group; National Pen; and All Other Businesses. It also provides printed and digital marketing products, internet-based canvas-print wall décor, business signage, and other printed products. CMPR is headquartered in Dundalk, Ireland.
For the second quarter, ending Dec. 31, 2021, CMPR's net sales increased 8.8% year-over-year to $849.72 million. Its operating income came in at $85.98 million, while its net income increased 65.6% from the prior quarter to $56.15 million. The company's EPS rose 70.5% year-over-year to $2.08.
CMPR is expected to generate $647.70 million in revenue. representing 11.9% year-over-year growth in the third quarter, ending March 31, 2022.
CMPR's POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. CMPT is also rated A for Quality and a B for Value and Sentiment. Within the Advertising industry, it is ranked #1.
Click here to see additional POWR Ratings for Growth, Stability, and Momentum for CMPR.
Tremor International Ltd (TRMR)
Headquartered in Tel Aviv-Yafo, Israel, TRMR provides an end-to-end software platform that helps advertisers reach relevant audiences and publishers. The company's demand-side platform (DSP) offers full-service and self-managed marketplace access to advertisers and agencies to implement their digital marketing campaigns in real-time across various ad formats.
Last month, TRMR announced the increased scale of its data-driven TV Intelligence solution. With the help of new partnerships signed in recent months, TV Intelligence solution's national footprint reached 44 million U.S. households with a more comprehensive and representative dataset sourced from smart TVs and eighteen MVPD providers.
In its second fiscal quarter, ended Dec. 31, 2021, TRMR's net sales increased 25.8% year-over-year to $102.53 million. The gross profit increased 31.1% from its year-ago value to $77.79 million, while its net income grew 15.2% from the prior-year quarter to $24.4 million. The company's non-IFRS EPS increased 35% year-over-year to $0.27.
The $0.25 consensus EPS estimate for the third quarter, ending Sept. 30, 2022, represents a 16.7% improvement year-over-year. Analyst expects revenue to grow 56.1% year-over-year to $93.88 million for the second quarter, ending June 30, 2022. The stock has gained 88.9% in price over the past year and 7.4% over the past month.
It is no surprise that TRMR has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has an A grade for Sentiment and a B for Quality. In the Advertising industry, it is ranked #4.
Click here to see the additional POWR Ratings for TRMR (Growth, Stability, Value, and Momentum).
PUBGY shares were trading at $13.79 per share on Friday morning, down $0.78 (-5.35%). Year-to-date, PUBGY has declined -18.40%, versus a -9.62% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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