The advertising industry is expected to witness robust growth in the foreseeable future, thanks to the rapid adoption of digital advertising amid increased digital media usage. As the industry’s prospects look bright, fundamentally sound advertising stocks, Publicis Groupe S.A. (PUBGY), WPP plc (WPP), and AdTheorent Holding Company, Inc. (ADTH) could be worth adding to your watchlist. Let’s discuss this in detail.
Advertising has long been an essential tool for a company’s survival, captivating consumers with targeted, cost-effective, and efficient communication. The pandemic has accelerated the growth in the advertising industry, with major progression in areas, including connected TV and e-commerce marketing.
Magna, a leading worldwide firm specializing in media investment and intelligence, predicts that the U.S. advertising industry will grow by 3.4%, culminating in a record-breaking $326 billion this year. The upsurge in revenue is expected to be primarily driven by digital media, which is anticipated to soar by 9% this year.
The increasing prevalence of social media platforms is enhancing the advertising industry’s outlook. Social media channels, spearheaded by Meta, Instagram, and TikTok, are projected to yield a total of $66 billion in advertising expenditures for the year, representing a 6% growth.
Furthermore, long-form Over-The-Top (OTT) streaming has become widely accepted and progressively ad-supported. This development is expected to enable brands to reconnect with audiences that were previously hard to reach and expensive to target through linear television at a reasonable cost.
The global advertising market is expected to reach $834.90 billion by 2028, growing at a 5.4% CAGR. Investors’ interest in Ad stocks is evident from the SmartETFs Advertising & Marketing Technology ETF’s (MRAD) 13.7% returns over the past three months.
Let us now discuss the featured stocks in detail.
Publicis Groupe S.A. (PUBGY)
PUBGY is a Paris-based global marketing and digital transformation company. It provides advisory, advertising, crisis communication, media consulting and buying, performance marketing, e-commerce, and healthcare communication services. It creates brand content for various channels under the Prodigious, Harbor, and The Pub brands.
On March 30, PUBGY announced the acquisition of Practia, a technology company providing digital transformation services, to expand its offerings in Latin America. The deal would allow PUBGY to penetrate one of the world’s fastest-growing digital business transformation markets and set up a base for a nearshore delivery platform to enhance its service to North American clients.
On January 10, the company announced the acquisition of Advertise BG, a major performance marketing agency in Bulgaria. The strategic move is expected to fortify PUBGY Bulgaria’s skills in digital transformation, increasing its existing range of digital strategy, data, social media, and digital content creation services.
PUBGY’s net revenues increased 19.9% year-over-year to €12.57 billion ($13.70 billion) for the year that ended December 31, 2022. Its operating income grew 23.2% from the prior year’s period to €1.77 billion ($1.93 billion). Also, net income attributable to PUBGY rose 19% year-over-year to €1.22 billion ($1.33 billion) while EPS stood at €4.82, up 18.1% year-over-year.
The consensus revenue estimate of $14.04 billion for the fiscal year (ending December 2023) reflects a 2.3% year-over-year improvement. Likewise, the consensus EPS estimate of $1.77 for the ongoing year indicates a 2.8% rise year-over-year. Moreover, the company topped its consensus revenue estimates in all four trailing quarters, which is impressive.
The stock has gained 68.6% over the past six months to close the last trading session at $19.90.
PUBGY’s solid fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, equating to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
PUBGY has an A grade for Stability and a B for Growth. It ranks #3 in the B-rated 17-stock Advertising industry.
In addition to the POWR Ratings I’ve just highlighted, you can see PUBGY’s ratings for Value, Quality, Sentiment, and Momentum here.
WPP plc (WPP)
Headquartered in London, the United Kingdom, WPP is a creative transformation company that provides communications, commerce, and technology services. Its segments include Global Integrated Agencies; Public Relations; and Specialist Agencies. The company offers various services, including advertising, marketing, investment, public relations, and more.
On March 29, WPP and Braze, Inc (BRZE), a leading customer engagement platform, announced their partnership to offer clients the power of personalized customer interactions through BRZE’s comprehensive customer engagement platform and WPP’s creative, data, and CRM capabilities.
This combination of advanced technology and expertise will enable WPP to remain competitive and deliver high-quality and scalable customer experiences.
Also, on March 22, the company announced the acquisition of Goat, a leading influencer marketing agency, to support the growth of WPP’s media investment group, GroupM Nexus. Goat’s expertise should enhance GroupM’s ability to create impactful campaigns for multinational brands across diverse markets.
For the year that ended December 31, 2022, WPP’s revenue increased 12.7% year-over-year to £14.43 billion ($17.87 billion), while its operating profit rose 10.5% from the year-ago value to £1.36 billion ($1.68 billion). Furthermore, the company’s profit for the year rose 7.6% from the prior year’s period to £775.40 million ($960.18 million), while its EPS stood at £61.2, a 16.6% year-over-year improvement.
Analysts expect WPP’s EPS to increase 6.9% year-over-year to $6.33 for the fiscal year ending December 2023. The company’s revenue for the current year is expected to grow 7.8% from the previous year’s period to $15.29 billion. Also, the company surpassed its consensus revenue estimates in all four trailing quarters.
Shares of WPP have gained 44% over the past six months to close the last trading session at $59.32.
WPP’s promising fundamentals are apparent in its POWR Ratings. The stock has an overall rating of B, translating to Buy in our proprietary rating system.
WPP has an A grade for Sentiment and a B for Stability. It has topped the 17-stock Advertising industry. Click here to access additional WPP ratings for Growth, Value, Quality, and Momentum.
AdTheorent Holding Company, Inc. (ADTH)
ADTH is a digital media platform that uses machine learning and advanced data science to deliver programmatic digital advertising services to advertising agencies and brands worldwide. It offers predictive targeting, customized measurement, analytical services, location-based targeting, and more.
On January 18, ADTH introduced the AdTheorent Predictive Audience Builder, a suite of platform tools that enable users to create predictive models and activate them to score audience quality. This cutting-edge technology should allow ADTH to optimize KPIs, improve data-driven audience quality, and gain a competitive advantage in digital advertising.
For the year that ended December 31, 2022, ADTH’s revenue and adjusted gross profit marginally increased year-over-year to $165.37 million and $109.34 million, respectively. The company’s income from operations stood at $1.28 million, up 30.6% year-over-year. Also, net income attributable to ADTH rose 12% from the prior year’s period to $29.34 million.
As of December 31, 2022, ADTH’s total liabilities stood at $35.18 million, compared to $101.66 million as of December 21, 2021.
Analysts expect ADTH’s revenue to grow 2% year-over-year to $169.34 million for the ongoing fiscal year ending December 2023. In addition, the company’s revenue is expected to increase by 13.5% year-over-year to $192.12 million in the next fiscal year ending December 2024. The stock gained 1.9% intraday to close the last trading session at $1.60.
ADTH’s POWR Ratings reflect its solid prospects. The stock has an overall rating of B, equating to Buy in our proprietary rating system.
The stock has an A grade for Value and a B for Sentiment. Within the same industry, it ranks #2 of 17 stocks.
To see additional POWR Ratings for Growth, Quality, Stability, and Momentum for ADTH, click here.
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PUBGY shares were trading at $19.55 per share on Friday morning, down $0.35 (-1.77%). Year-to-date, PUBGY has gained 23.19%, versus a 6.81% rise in the benchmark S&P 500 index during the same period.
About the Author: Aanchal Sugandh
Aanchal's passion for financial markets drives her work as an investment analyst and journalist. She earned her bachelor's degree in finance and is pursuing the CFA program. She is proficient at assessing the long-term prospects of stocks with her fundamental analysis skills. Her goal is to help investors build portfolios with sustainable returns.
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