We recently compiled a list of the 15 Best Advertising Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where QuinStreet, Inc. (NASDAQ:QNST) stands against the other advertising stocks.
Ad spending in 2024 received a significant boost from recurring events such as the US election and the Olympics, and experts believe that these spending patterns are likely to add billions to the market. Media agency Magna increased its US ad spending forecast for the year, expecting revenue growth of 11.4% to $377 billion, per the news shared with Marketing Dive. The company expects non-cyclical ad spending to grow by 8.9%, reflecting a rise from 8.2% in previous forecasts. This marks one of the best performances for the category in 20 years. This revision stemmed from improved macroeconomic conditions, healthy appetites in digital and streaming, and cyclical events, such as the elections and the Summer Olympics.
Advertising To Top US$1 trillion in 2026, Says PwC
As per PwC, fueling revenue growth by selling E&M products directly to users is challenging. Of the 3 major categories i.e., consumer spending, connectivity, and advertising, consumer spending is the smallest and slowest growing. The connectivity category i.e., fixed and mobile services, topped US$1.1 trillion in 2023. Advertising outpaced consumer spending in 2023 and should top US$1 trillion in 2026. PwC believes that it is expected to grow at a 6.7% CAGR through 2028.
With advertising expected to make up ~55% of total E&M industry growth over the upcoming 5 years, PwC believes that it will become a more important part of companies’ business models. For strategic reasons, all participants in the E&M industry are required to be more skillful at selling ads.
According to PwC, the changes to the way businesses approach the ad business are expected to be seen in 3 key areas. Firstly, the monetization of data is expected to fuel more sophisticated advertising models. Next, the connection will be closer between the discovery of products and services and their purchase and consumption. Finally, it will be important for companies to understand how global privacy regulations impact growth.
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Trends To Watch Out for in 2025
As per Mediatool, key advertising trends to look out for include an emphasis on authenticity, visual content domination, integration of AI, mobile-centric campaigns, and growth of social commerce. AI/ML has become important in the world of digital advertising. As of now, 32% of marketers leverage AI for creating, managing, and optimizing their ads. According to Market.us, the global AI in advertising market is expected to reach $28.4 billion in the year 2033 with a CAGR of 28.4%. This was valued at $6.7 billion in the year 2023. Based on the application, targeted advertising dominated the broader market with a share of 31.1% in 2023.
Our Methodology
To list the 15 Best Advertising Stocks to Buy According to Hedge Funds, we used a screener and sifted through several online rankings. After getting the initial list of 25-28 stocks, we selected the ones having high hedge fund holdings. Finally, the stocks were ranked in ascending order of their hedge fund sentiment, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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QuinStreet, Inc. (NASDAQ:QNST)
Number of Hedge Fund Holders: 19
QuinStreet, Inc. (NASDAQ:QNST) is an advertising technology company powering online marketplaces to match searching consumers with brands in large end markets like insurance, home services, credit cards, personal loans, and banking.
Wall Street experts believe that QuinStreet, Inc. (NASDAQ:QNST)’s key vertical, insurance, appears to be back in growth mode. The company’s revenue growth is expected to accelerate from current levels, which can drive solid operating margin expansion and earnings growth. In Q1 2025, the company saw a 125% YoY increase in revenue and significant margin expansion. These results were aided by the broad-based ramp of auto insurance carrier budgets, and by its expanded client, media, and product footprints.
Analysts opine that the insurance “super cycle” is expected to continue as carriers have been reporting strong results overall, and from its channel. QuinStreet, Inc. (NASDAQ:QNST) remains focused on increasing and optimizing media supply to meet surging carrier demand. These efforts should translate into further margin expansion. Experts foresee a strong demand for digital marketing services moving forward, particularly in the insurance industry.
Analysts at Craig Hallum upped their price objective on shares of QuinStreet, Inc. (NASDAQ:QNST) from $25.00 to $32.00, giving a “Buy” rating on 5th November. Next Century Growth Investors, LLC, an investment Management Company, released its first-quarter 2024 investor letter. Here is what the fund said:
“QuinStreet, Inc. (NASDAQ:QNST) is an advertising technology company that powers online marketplaces to match searching consumers with brands in large end markets such as insurance, home services, credit cards, personal loans, and banking. With one of the largest media networks, QNST allows consumers to find brands faster, while giving the brands measurability of digital media spend. We have owned QNST in the past. Since then, they have streamlined the business by eliminating a few problematic end markets, and their largest vertical, insurance, appears to be back in growth mode. We believe QNST’s revenue growth can accelerate from current levels, which should also drive solid operating margin expansion and earnings growth.”
Overall QNST ranks 5th on our list of the best advertising stocks to buy according to hedge funds. While we acknowledge the potential of QNST as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than QNST but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.