The adoption of smart advertising technologies, the ascent of AR & VR, and the ever-changing landscape of consumer behavior are reshaping the advertising landscape. Therefore, I present quality advertising stocks Criteo S.A. (CRTO), Ziff Davis, Inc. (ZD), and Cimpress plc (CMPR) that have garnered the attention of analysts.
As the world continues to navigate the ever-evolving landscape of consumer behavior, the advertising industry is well-positioned to remain vital for businesses seeking to connect with their audiences and ensure business continuity.
The United States is the world's largest advertising market, with projected revenue growth of 2.6%, reaching $352 billion this year. The digital advertising landscape is evolving, with search leading the spending in 2023, followed by video and banner ads. However, from 2024 onwards, video advertising is expected to dominate the ad market.
In addition, the increased utilization of mobile apps has created a heightened demand for mobile advertising. The mobile platform has proven its resilience and adaptability during challenging times like the COVID-19 pandemic, making it an integral component of marketing strategies worldwide. The mobile advertising market is projected to grow from $175.62 billion in 2023 to $750.21 billion by 2030 at a CAGR of 23.1%.
Moreover, smart advertising utilizes advanced technologies like AI, machine learning, big data, and real-time bidding to automate advertising processes. This approach enhances brand awareness and enables more efficient targeting of consumers, leading to improved campaign performance.
The global smart advertising market is predicted to grow to around $1.87 trillion by 2030 at a CAGR of approximately 20.4%.
Furthermore, Augmented Reality (AR) and Virtual Reality (VR) are key technology platforms for global marketing, offering innovative advertising methods and enhancing employees' creativity.
Considering these conducive trends, let's take a look at the fundamentals of the three best Advertising stocks, starting with number 3.
Stock #3: Criteo S.A. (CRTO)
Headquartered in Paris, France, CRTO provides marketing and monetization services on the open Internet in North and South America, Europe, the Middle East, Africa, and the Asia-Pacific.
CRTO’s trailing-12-month asset turnover ratio of 0.96 is 99.1% higher than the 0.48x industry average. Its trailing-12-month CAPEX/Sales of 5.90% is 46.6% higher than the 4.02% industry average.
On September 12, CRTO launched its self-service demand-side platform, Commerce Max, which offers brands and agencies a unified access point to retail media inventory on and off retail sites. Additionally, CRTO is expanding its retailer monetization solutions to help integrate marketplace and in-store monetization technologies.
CRTO’s revenue rose 4.9% year-over-year to $469.19 million in the fiscal third quarter that ended September 30, 2023. Its gross profit rose 14.2% from the previous-year quarter to $205.13 million. Also, its adjusted net income rose 28.6% and 34% year-over-year to $42.73 million and $0.71 per share.
Analysts expect CRTO’s revenue for the fiscal second quarter ending December 2023 to increase 11.6% year-over-year to $316.28 million. Its EPS is expected to rise 64.6% from the previous-year quarter to $1.38 for the same quarter. Also, it has surpassed EPS and revenue estimates in three of the trailing four quarters, which is remarkable.
The stock has declined marginally over the past year to close the last trading session at $24.64.
CRTO’s POWR Ratings reflect its promising outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
CRTO has a B grade for Value, Sentiment, and Growth. It is ranked #3 in the 20-stock Advertising industry.
Click here to see the additional POWR Ratings for CRTO (Momentum, Quality, and Stability).
Stock #2: Ziff Davis, Inc. (ZD)
ZD provides internet information and services in the United States, Canada, Ireland, and internationally. It operates in two segments, Digital Media; and Cybersecurity and Martech.
ZD’s trailing-12-month net income margin of 6.90% is 100.1% higher than the 3.45% industry average. Its trailing-12-month gross profit margin of 85.67% is 75.2% higher than the 48.90% industry average.
During the fiscal first quarter ended June 30, 2023, ZD’s total revenues came in at $326.02 million. Total operating costs and expenses decreased 1.5% year-over-year to $2801.12 million. Its adjusted EBITDA came in at $106.68 million and adjusted net income stood at $59.58 million.
Street expects ZD’s revenue for the fiscal third quarter ended December 2023 to rise 1.5% year-over-year to $402.60 million. Its EPS for the same quarter is expected to increase 7.7% from the year-ago quarter to $2.43. Also, it has surpassed EPS estimates in three of the trailing four quarters.
Shares of ZD rose 2.1% intraday to close the last trading session at $59.93.
ZD’s robust prospects are reflected in its POWR Ratings. The stock has an overall B rating, equating to a Buy in our proprietary rating system.
The stock has a B grade for Value, Quality, and Growth. It is ranked #2 in the same industry.
Beyond what is stated above, we’ve also rated ZD for Momentum, Sentiment, and Stability. Get all ZD ratings here.
Stock #1: Cimpress plc (CMPR)
Based in Dundalk, Ireland, CMPR provides various mass customization of printing and related products in North America, Europe, and internationally. The company operates through five segments: Vistaprint; PrintBrothers; The Print Group; National Pen; and All Other Businesses.
CMPR’s trailing-12-month gross profit margin of 46.97% is 55% higher than the 30.31% industry average. Its trailing-12-month asset turnover ratio of 1.60x is 101.9% higher than the 0.79x industry average.
CMPR’s revenue increased 7.7% year-over-year to $757.29 million in the first quarter of fiscal year 2024, which ended September 30, 1023. The company reported an income from operations of $34.10 million, compared to a loss of $17.97 million in the previous-year quarter. Its adjusted EBITDA rose 94.6% year-over-year to $88.74 million. Also, its adjusted free cash flow amounted to $10.93 million, compared to the negative $52.22 million in the year-ago quarter.
The company anticipates at least 8% reported revenue growth for Fiscal year 2024 (assuming current currency rates) and at least 6% organic constant-currency revenue growth. It expects operating income of at least $206 million and adjusted EBITDA of at least $425 million. The company also maintains its prior guidance of approximately 40% conversion of adjusted EBITDA to adjusted free cash flow and aims to reduce net leverage to below 3.25x by the end of FY2024 as per its credit agreement.
CMPR’s revenue for the fiscal second quarter ending December 2023 is expected to increase 5.6% year-over-year to $892.16 million. Its EPS is expected to be $1.24 for the same quarter.
The stock has gained 159.9% over the past year to close the last trading session at $59.44.
CMPR’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.
CMPR also has an A grade for Quality and a B in Growth, Value, and Sentiment. It is ranked first in the same industry.
To access additional CMPR’s Momentum and Stability ratings, click here.
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ZD shares were trading at $61.58 per share on Friday morning, up $1.65 (+2.75%). Year-to-date, ZD has declined -22.15%, versus a 14.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Kritika Sarmah
Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.
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