In this article, we discuss 10 ad-tech stocks to buy as the industry goes through upheavals.
The ad-tech space has witnessed a long-running battle between industry titans, Apple Inc. (NASDAQ:AAPL) and Meta Platforms, Inc. (NASDAQ:META), as they fight for market share. The companies are gunning for similar areas of expertise. For example, Meta Platforms, Inc. (NASDAQ:META) CEO Mark Zuckerberg announced his firm’s foray into virtual-reality tech, and Apple Inc. (NASDAQ:AAPL)’s Tim Cook disclosed that he is also looking into the same. Similarly, Meta recently started testing encrypted chats, a domain Apple has monopolized for years.
Apple has a track record of maintaining user privacy, while Meta has been under fire for sharing user data on countless occasions. Apple’s latest changes to its iOS led to a $10 billion revenue hit for Meta. However, advertisers who depended on Meta’s data for targeted ads and insights on Facebook and Instagram were impacted negatively.
Ever since Apple Inc. (NASDAQ:AAPL)’s Tim Cook stated that ad-based businesses had no link with real-world violence, the company has juiced up its efforts to feed more ads to iPhone users and use advanced tech for targeted ads. Apple seems to be on a warpath, and it is adamant on stealing the small and medium-sized businesses who have relied on Facebook’s ad platform for over a decade. Apple Inc. (NASDAQ:AAPL) is aggressively building up an ad-tech team that incorporates privacy into targeted advertising efforts.
Since Apple is offering greater privacy, small businesses might just jump ship from Meta Platforms, Inc. (NASDAQ:META)’s ad platforms to Apple. This will decidedly hurt Meta’s entire business structure.
While there is a paradigm shift in the ad-tech market, some of the best stocks to buy as the industry navigates these upheavals include The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG).
Photo by Joshua Earle on Unsplash
Our Methodology
We selected stocks in the ad-tech market that have huge growth potential. We chose these stocks based on positive analyst ratings, strong underlying fundamentals, and solid future catalysts. We have arranged the list according to the hedge fund sentiment around the securities, which was assessed from Insider Monkey’s Q2 2022 database of about 900 elite hedge funds.
Let’s start our list of the ad-tech stocks to buy as the industry goes through upheavals.
Ad-Tech Stocks to Buy as Industry Goes Through Upheavals
10. fuboTV Inc. (NYSE:FUBO)
Number of Hedge Fund Holders: 9
fuboTV Inc. (NYSE:FUBO) is a New York-based company offering streaming television services. Together with Kantar, a London-based data analytics and brand consulting company, fuboTV Inc. (NYSE:FUBO) helps advertisers understand the effectiveness of their brand campaigns and carry out CTV advertising.
On August 16, fuboTV Inc. (NYSE:FUBO)’s CFO John Janedis said that the company is working towards long-term adjusted EBITDA profitability and positive cash flow goals, which it expects to realize in 2025. He predicts fuboTV Inc. (NYSE:FUBO)’s revenue to more than double between 2022 and 2025, and also forecasts higher average revenue per user on subscriptions and ads. He noted that the churn around the firm’s latest price hike was smaller than anticipated. This makes fuboTV Inc. (NYSE:FUBO) one of the best ad-tech stocks to buy as the industry experiences turbulence.
Needham analyst Laura Martin on August 18 raised the price target on fuboTV Inc. (NYSE:FUBO) to $7 from $5 and maintained a Buy rating on the shares. The company’s Investor Day presentation reaffirmed its commitment to be cash flow positive by 2025, as well as its new target to achieve an adjusted EBITDA margin of 15% in 2025, the analyst told investors in a research note. She also cited fuboTV Inc. (NYSE:FUBO)’s plans to introduce an ad-driven tier, which should boost its total addressable market.
According to Insider Monkey’s data, 9 hedge funds were long fuboTV Inc. (NYSE:FUBO) at the end of Q2 2022, compared to 16 funds in the prior quarter. Paul Marshall and Ian Wace’s Marshall Wace LLP is the largest position holder in the company, with 5.6 million shares worth $13.80 million.
Like The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), fuboTV Inc. (NYSE:FUBO) is one of the stocks to watch as the ad-tech industry transforms.
Here is what Bireme Capital specifically said about fuboTV Inc. (NYSE:FUBO) in its second quarter 2022 investor letter:
“In contrast, we don’t foresee fuboTV Inc. (NYSE:FUBO) finding a profitable business model. The company, which operates a streaming TV service, still has negative gross margins and in 2021 generated over $300m in operating losses. This company may end up in bankruptcy, given that it already carries around $400m of debt and looks set to burn over $300m of cash this year. The stock has fallen from $26 when we last mentioned it to $2.60 today. We remain short.”
9. Integral Ad Science Holding Corp. (NASDAQ:IAS)
Number of Hedge Fund Holders: 12
Integral Ad Science Holding Corp. (NASDAQ:IAS) operates as a digital advertising verification company in the United States, the United Kingdom, Germany, Italy, Spain, Sweden, Singapore, Australia, France, Japan, Canada, India, and Brazil. In addition to providing actionable insights via its cloud platform, Integral Ad Science Holding Corp. (NASDAQ:IAS) specializes in digital advertising across multiple devices, channels, and formats, such as desktop, mobile, connected TV, social, display, and video. The company’s Q2 revenue of $100.33 million climbed 33.6% year-over-year, beating estimates by $2.51 million.
On August 8, Wells Fargo analyst Brian Fitzgerald reaffirmed an Overweight rating on Integral Ad Science Holding Corp. (NASDAQ:IAS) and lowered the price target on the shares to $21 from $28. The analyst noted that the company had strong Q2 results, exceeding top and bottom-line estimates and guidance. Integral Ad Science Holding Corp. (NASDAQ:IAS) revised its full year 2022 outlook lower, due to macro headwinds leading to softer ad spend, minor delays in new activations, and longer sales cycles. However, the analyst views its volume-driven model as somewhat protected from a larger media recession and continues to believe that Integral Ad Science Holding Corp. (NASDAQ:IAS)’s long-term opportunity is intact.
Among the hedge funds tracked by Insider Monkey, 12 funds were long Integral Ad Science Holding Corp. (NASDAQ:IAS) at the end of June 2022, compared to 15 funds in the last quarter. Robert Smith’s Vista Equity Partners is the biggest stakeholder of the company, with 94.3 million shares worth $937 million.
8. DoubleVerify Holdings, Inc. (NYSE:DV)
Number of Hedge Fund Holders: 12
DoubleVerify Holdings, Inc. (NYSE:DV) is a New York-based company that provides a software platform for digital media measurement and data analytics in the United States and internationally. The company’s solutions offer advertisers unbiased data insights that raise the effectiveness, quality, and return on their digital advertising investments.
On August 4, the company reported top-line Q2 results and boosted guidance on the back of record activation revenue and ongoing momentum on social and CTV platforms. DoubleVerify Holdings, Inc. (NYSE:DV) expects full-year 2022 revenue of $448 million to $450 million, exceeding market estimate of $441.88 million. Barclays analyst Raimo Lenschow on August 4 raised the price target on DoubleVerify Holdings, Inc. (NYSE:DV) to $27 from $21 and kept an Equal Weight rating on the shares following the “strong” Q2 results.
According to Insider Monkey’s data, DoubleVerify Holdings, Inc. (NYSE:DV) was part of 12 hedge fund portfolios at the end of Q2 2022, compared to 16 funds in the last quarter. Chase Coleman’s Tiger Global Management is the leading shareholder of the company, with 2.8 million shares worth $63.3 million.
In its Q2 2021 investor letter, Baron Discovery Fund mentioned DoubleVerify Holdings, Inc. (NYSE:DV). Here is what the fund said:
“DoubleVerify, Inc. is a software platform for digital media measurement and analytics. Founded in 2008, its mission is to increase the effectiveness and transparency of the digital advertising ecosystem through the metrics provided on its platform. DoubleVerify directly analyzes over five billion digital ad transactions daily, measuring whether ads are delivered in a fraud-free, brandsafe environment and are fully viewable in the intended geography. Advertisers are increasingly searching for third-party verification as they attempt to maximize their return on investment in the fast-growing digital advertising market. As such, DoubleVerify’s revenue has grown at over a 50% compounded annualized rate from 2017 to 2020 and is expected to grow approximately 30% over the next few years with favorable margins. We expect future growth to be driven by strong category growth across digital advertising as well as new and existing customer growth, product innovation, international expansion, and potential M&A. DoubleVerify is the market leader in its segment boasting integration across major demand-side platforms and partnerships with major social advertising platforms (Facebook, Twitter, Pinterest, etc.). Combining all of these factors, we feel confident in underwriting DoubleVerify as a strong “Barontype” investment: a competitively differentiated business in a secularly growing industry with a strong management team. We expect that increased demand for third-party digital advertising data analytics will fuel continued adoption of DoubleVerify’s solutions across key channels, formats, devices, and geographies.”
7. PubMatic, Inc. (NASDAQ:PUBM)
Number of Hedge Fund Holders: 12
PubMatic, Inc. (NASDAQ:PUBM) is a California-based company that provides a cloud infrastructure platform that enables real-time advertising transactions for internet content creators and advertisers worldwide. In Q2 2022, the company posted a beat in its Q2 non-GAAP EPS and revenue. According to the company’s CEO Rajeev Goel, the main growth drivers included strength in the Americas region, CTV publisher acquisition, existing publisher expansion, and supply path optimization. For FY22, the revenue guidance was revised to $277 million to $281 million, reflecting 23% growth at the midpoint. Due to ongoing positive catalysts and potential for future growth, PubMatic, Inc. (NASDAQ:PUBM) classifies as one of the ad-tech stocks that must be considered amid industry upheavals.
On August 9, JMP Securities analyst Andrew Boone maintained an Outperform rating on PubMatic, Inc. (NASDAQ:PUBM) and lowered the price target on the shares to $34 from $40. The company’s Q2 results were “excellent” as revenue growth climbed to 27% and EBITDA margins of 36.6% came in ahead of the high end of guidance, the analyst told investors. At 7.0-times expected 2023 EBITDA at $19.30 in after hours trading, the stock remains undervalued, the analyst added.
According to Insider Monkey’s Q2 data, 12 hedge funds were bullish on PubMatic, Inc. (NASDAQ:PUBM), compared to 14 funds in the prior quarter. Jim Simons’ Renaissance Technologies held the leading position in the company, with 767,500 shares worth $12 million.
6. Magnite, Inc. (NASDAQ:MGNI)
Number of Hedge Fund Holders: 23
Magnite, Inc. (NASDAQ:MGNI) is a New York-based company that provides an independent sell-side advertising platform in the United States and internationally. On August 10, Susquehanna analyst Shyam Patil reaffirmed a Positive rating on Magnite, Inc. (NASDAQ:MGNI) but lowered the price target on the shares to $13 from $24. The analyst said they reported a solid Q2, with CTV outperforming expectations despite macro headwinds. He said although the guidance was slightly lower given the tough macro, most of the weakness is from desktop, not CTV. Magnite, Inc. (NASDAQ:MGNI) remains one of the ad-tech stocks to buy as the industry faces volatility.
According to Insider Monkey’s data, 23 hedge funds were bullish on Magnite, Inc. (NASDAQ:MGNI) at the end of the second quarter of 2022, compared to 28 funds in the last quarter. Nine Ten Partners is a notable position holder in the company, with 2.36 million shares worth $21 million.
In addition to The Trade Desk, Inc. (NASDAQ:TTD), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc. (NASDAQ:GOOG), Magnite, Inc. (NASDAQ:MGNI) is one of the ad-tech stocks on the radar of smart investors.
Here is what Alger has to say about Magnite, Inc. (NASDAQ:MGNI) in its Q2 2021 investor letter:
“Magnite provides an advertising supply side platform for publishers. The technology helps publishers such as network television stations or cable news providers automate the sale of digital advertising inventory across different formats and channels, like desktop, mobile, video, audio, connected TV and over-the-top TV. Publishers monetize their digital advertising inventory by using Magnite’s platform to access a global market of ad buyers, including advertising agencies that use supply side platforms. Magnite also helps sellers decrease costs and protect their brands and user experience. Magnite receives ad inventory from sellers and optimizes publishers’ revenue yields by processing the highest buyer bids. Currently, Magnite keeps approximately 10% of ad spend as revenue (i.e. take rate) and passes on the remainder of the ad spend to publishers. Magnite’s clients include many of the world’s leading publishers of websites and mobile applications and the company believes that its platform reaches approximately 1 billion individuals globally.
Shares of Magnite underperformed in the second quarter due to the growth market selloff and slower-than-expected growth in connected TV during the first three months of this year. We believe the 32% growth in connected TV was below expectations and due to a one-time issue with one of the company’s publishing partners that ran out of advertising inventory. Management noted the issue has been fixed and the company saw strong reaccelerating growth in April. Additionally, we believe Magnite’s recent acquisition of video advertising company SpotX will significantly bolster the company’s positioning within connected TV, a high-growth area of the digital advertising market that is taking share from linear TV ad budgets.”
5. Digital Turbine, Inc. (NASDAQ:APPS)
Number of Hedge Fund Holders: 27
Digital Turbine, Inc. (NASDAQ:APPS) is a Texas-based company that operates a mobile growth platform for advertisers, publishers, carriers, and device original equipment manufacturers (OEMs). The company announced a Q2 non-GAAP EPS of $0.38 and a revenue of $188.63 million, ahead of Wall Street estimates by $0.03 and $3.69 million, respectively.
On August 9, Craig-Hallum analyst Anthony Stoss maintained a Buy rating on Digital Turbine, Inc. (NASDAQ:APPS) but lowered the price target on the shares to $60 from $85. The analyst believes the SingleTap software from Digital Turbine, Inc. (NASDAQ:APPS) is a game changer for the in-app advertising market and the stock could be a multi-bagger again.
According to Insider Monkey’s data, 27 hedge funds were bullish on Digital Turbine, Inc. (NASDAQ:APPS) at the end of June 2022, compared to 32 funds in the prior quarter. Greenhaven Road Investment Management is the leading stakeholder of the company, with 1.40 million shares worth $24.45 million.
Here is what Greenhaven Road Capital has to say about Digital Turbine, Inc. (NASDAQ:APPS) in its Q1 2022 investor letter:
“Digital Turbine (NASDAQ:APPS) – Digital Turbine has effectively zero exposure to oil or Ukraine, is well equipped to deal with inflation as all of its inputs and outputs are digital, and should have zero issues with rising rates. Shares got hammered with the decline in “growth stocks” as well as a concern that Google would change its policies on Android device IDs that are used for advertising targeting and attribution (a change that wasn’t put in place but was discussed in a blog post). Given that Digital Turbine has software on devices and is not reliant on the Android device IDs for attribution, it is more likely they would be a beneficiary of this change than a victim. Add in the fact that the European Union is progressing towards a Digital Markets Act that would compel Apple to allow for competing app stores, the regulatory landscape is favorable to Digital Turbine. The decline is exceedingly frustrating.
Our investment in Digital Turbine is predicated on three beliefs. The first is that companies will continue to want direct relationships with their customers via apps. The second is that companies will go to where the eyeballs are, which means mobile phones for the foreseeable future. The third belief is that Digital Turbine can carve out a durable and profitable niche between end users and app developers/carriers/handset manufacturers. All of these beliefs remain in place; nothing has changed. Digital Turbine’s software is installed on over 1.5 billion devices and growing, and they work with more carriers and companies every quarter.
In terms of valuation, management has guided to tripling revenues and 10Xing profits over the next three to five years. Yes, that is a long time and a lot can go wrong, but we are not paying for that level of upside. If you take the last quarter’s run rate earnings, adjusting for one-time expenses related to acquisitions and the amortization of intangibles, you get an adjusted net income of approximately 43 cents per share or $1.72 per share annualized. This is for a core legacy business that grew 43% with large wins for the MobilePosse business and a SingleTap business with a bright future. Unlike many high growth companies, Digital Turbine is profitable while growing and has a PEG ratio below 1.”
4. The Interpublic Group of Companies, Inc. (NYSE:IPG)
Number of Hedge Fund Holders: 30
The Interpublic Group of Companies, Inc. (NYSE:IPG) is a New York-based company offering advertising and marketing services worldwide. The company provides consumer advertising, digital marketing, communications planning, public relations, and data science services. Redburn analyst Bianca Dallal resumed coverage of The Interpublic Group of Companies, Inc. (NYSE:IPG) on September 8 with a Neutral rating. Previously, on August 25, Exane BNP Paribas analyst Lina Ghayor initiated coverage of Interpublic Group with an Outperform rating. It remains one of the top ad-tech stocks to buy as the industry faces upheavals.
On August 30, The Interpublic Group of Companies, Inc. (NYSE:IPG) declared a $0.29 per share quarterly dividend, in line with previous. The dividend is distributable on September 15, to shareholders of record as of September 1. The company also delivered market-beating Q2 results.
According to Insider Monkey’s data, 30 hedge funds were bullish on The Interpublic Group of Companies, Inc. (NYSE:IPG) at the end of Q2 2022, compared to 32 funds in the earlier quarter. Harris Associates held the leading position in the company, consisting of 14.5 million shares worth about $400 million.
Here is what Ariel Fund & Ariel Appreciation Fund has to say about The Interpublic Group of Companies, Inc. (NYSE:IPG) in its Q3 2021 investor letter:
“Marketing communication company, Interpublic Group of Companies, Inc. (IPG) was the top contributor over the trailing one-year period. Notably, IPG is delivering a stronger than expected revenue mix between Technology and Healthcare relative to its peer group, solid cost containment and margin expansion. Meanwhile, the company continued to focus on de-levering the balance sheet. In our view, IPG’s Acxiom acquisition for data has proven to be a winner, helping the company increase their revenue across all eight major advertising sectors by industry. We believe these results continue to demonstrate the strength and resiliency of the business model and expect IPG to be a beneficiary of increasing advertising and marketing budgets across an improving global economy.”
3. The Trade Desk, Inc. (NASDAQ:TTD)
Number of Hedge Fund Holders: 34
The Trade Desk, Inc. (NASDAQ:TTD) is a California-based technology company that operates a self-service on-demand platform, allowing users to create and optimize data-driven digital advertising campaigns across multiple ad formats and channels. The stock climbed 36% on August 10 as The Trade Desk, Inc. (NASDAQ:TTD) reported Q2 results that outperformed estimates, and analysts praised the company for its “exceptional” execution. For Q3 2022, The Trade Desk, Inc. (NASDAQ:TTD) expects a revenue of $385 million, ahead of the Wall Street consensus of $382.3 million. The company anticipates an EBITDA of about $140 million. This makes The Trade Desk, Inc. (NASDAQ:TTD) one of the top ad-tech stocks to buy.
Wolfe Research analyst Gal Munda on August 16 initiated coverage of The Trade Desk, Inc. (NASDAQ:TTD) with a Peer Perform rating. The analyst said The Trade Desk, Inc. (NASDAQ:TTD) continues to defy the rest of the Advertising Technology industry. He contended that the stock’s performance remains excellent, but the market has recognized that as the shares gained more than 30% after posting Q2 results.
According to Insider Monkey’s second quarter data, 34 hedge funds were bullish on The Trade Desk, Inc. (NASDAQ:TTD), with collective stakes worth about $544 million. Zevenbergen Capital Investments is the largest position holder in the company, with 3.2 million shares worth $138 million.
Here is what Rowan Street has to say about The Trade Desk, Inc.(NASDAQ:TTD) in its Q2 2022 investor letter:
“Jeff Green, Founder/CEO of Trade Desk
Jeff has been on a mission to make data-driven advertising as ubiquitous as electronic trading in equities ever since he founded the Trade Desk in 2009. Since day one, his goal was to create a platform where advertisers could value media inventory through data-driven decisions. With the ability to buy and sell advertising inventory electronically or programmatically, advertisers could use data to make better decisions on what, when, and whom to show an ad impression. Jeff owns 10% of the company. Jeff has built Trade Desk into a leader in ad tech, with a record of $6.2 billion spent on the platform in 2021, up 6x since 2016. Revenues are estimated to hit $1.6 billion in 2022, up almost 8x since 2016.”
2. Publicis Groupe S.A. (OTC:PUBGY)
Number of Hedge Fund Holders: N/A
Publicis Groupe S.A. (OTC:PUBGY) is a French company that specializes in marketing, communications, and digital business transformation services. The firm operates in North America, Europe, the Asia Pacific, Latin America, Africa, and the Middle East. The company achieved organic growth of 10.3% in Q2, and for the rest of the year, Publicis Groupe S.A. (OTC:PUBGY) expects organic growth of 6% to 7%, operating margin rate between 17.5% and 18%, and free cash flow of at least €1.5 billion.
Redburn analyst Bianca Dallal on September 8 resumed coverage of Publicis Groupe S.A. (OTC:PUBGY) with a Buy rating, citing valuation discount and proven earnings strength, which she views as “a compelling margin of safety”.
1. Netflix, Inc. (NASDAQ:NFLX)
Number of Hedge Fund Holders: 95
Netflix, Inc. (NASDAQ:NFLX) is one of the best ad-tech stocks to buy as the industry faces upheavals. The company is in the process of developing an ad-tiered plan, which will be less expensive than its current ones, and will compete with industry peers. On September 7, Macquarie analyst Tim Nollen upgraded Netflix, Inc. (NASDAQ:NFLX) to Neutral from Underperform with a price target of $230, up from $170. The analyst is now more confident in Netflix, Inc. (NASDAQ:NFLX)’s long-term upside potential. He expects that Netflix, Inc. (NASDAQ:NFLX) could generate up to $3.6 billion in U.S. and Canada sales by 2025 and $8.5 billion globally with ads, as well as $2 billion in total incremental revenue.
According to Insider Monkey’s data, 95 hedge funds were long Netflix, Inc. (NASDAQ:NFLX) at the end of Q2 2022, compared to 109 funds in the last quarter. Ken Fisher’s Fisher Asset Management featured as the biggest position holder in the company, with 6.5 million shares worth $1.14 billion.
Here is what L1 Capital International specifically said about Netflix, Inc. (NASDAQ:NFLX) in its Q2 2022 investor letter:
“While it seems an eternity ago, in April Netflix, Inc. (NASDAQ:NFLX) reported Q1 2022 results and gave forward guidance which flashed many red flags. Not only were subscription numbers (and forward guidance) well below expectations, but management also gave new disclosure on the massive extent of password sharing which raises concerns that Netflix is much more mature than we had previously considered, constraining future growth. Management also haphazardly announced it will introduce an advertising-supported subscription tier, albeit currently lacking the necessary capabilities to do so. Despite continuing to produce world-leading content, we have lost confidence in management’s ability to respond to increased competition and a more challenging operating environment. We sold our entire investment in Netflix immediately post Q1 2022 results. Currently we do not consider Netflix to meet our stringent quality criteria to be considered as a potential investment in the Fund.”
You can also take a look at Best IPO Stocks To Buy and 12 Best Medical Device Stocks To Buy Now.
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Disclosure: None. 10 Ad-Tech Stocks to Buy as Industry Goes Through Upheaval is originally published on Insider Monkey.
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