3 Stocks Best Positioned to Benefit From the Digital Ad Rebound
WPP’s (NYSE:WPP) GroupM has predicted that U.S. digital ad revenue will grow by an impressive 9.4% this year. I believe that that growth estimate is conservative, given the economy’s resilience. Reduced concerns about a recession, lower inflation and overall greater confidence in the economy will also factor in. Accordingly, growing user bases and robust revenue growth make digital ad stocks attractive to advertisers and consumers. Consequently, these stocks are most likely to get a boost from the digital ad rebound.
Roku (ROKU)
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Roku (NASDAQ:ROKU) obtains the lion’s share of its revenue from connected TV ads, and the connected TV ad market is thriving. Specifically, the sector’s revenue is expected to soar 22% this year to $30.1 billion.
Given Roku ‘s status as a leader in the connected TV ad market, its revenue unsurprisingly jumped 20% YOY. Moreover, its user base climbed 16%, while its streaming hours soared 50% YOY.
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Roku obtains a significant amount of its ad revenue from companies promoting their own streaming channels. Therefore, the continuation of the “streaming wars” should boost the company’s top and bottom lines this year.
In light of nearly 50% of American household’s with broadband internet now using Roku’s system, the company should get a boost from political ads as the presidential election looms closer.
Etsy (ETSY)
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Etsy (NASDAQ:ETSY) allows individual artists to sell their products online.
Last month, investment bank B. Riley started coverage of the stock with a “Buy” rating and a $100 price target, nearly 50% above the name’s current levels. The bank says that the number of active buyers who are continuing to use the site is growing, which will benefit Etsy’s ad business.
In its Q3 press release, Etsy wrote that “Solid revenue growth was primarily driven by growth in Etsy Ads, payments revenue and transaction fee revenue from Offsite Ads.” As digital ad revenue climbs, it’s a good bet that Etsy will deliver strong top-and-bottom-line growth.
Pinterest (PINS)
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In 2024, Pinterest (NYSE:PINS) will continue to get a significant lift from its strong ad demand and its partnership with Amazon (NASDAQ:AMZN).
The deal with Amazon to have the e-commerce giant advertising on Pinterest kicked off in Q2 2023. Wells Fargo estimated that the deal would boost Pinterest’s top line by $360 million in the U.S. and Canada. Accordingly, as advertising tends to have very high margins, most of the revenue from the deal will to flow to Pinterest’s bottom line.
The company’s top line and user base climbed 6.4% and 8% year-over-year, respectively.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.
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