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Highlights:
- Revenue of Alphabet Inc. (GOOGL) surged six per cent YoY in Q3 FY22.
- GAAP net income of Perion Network (PERI) was up 141 per cent YoY in the latest quarter.
- The OMC stock rose about 14 per cent YoY.
The global financial markets have been jittery this year due to the Russia-Ukraine war, supply chain woes, and other macroeconomic factors. Simultaneously, the US market has also been hammered through the year in the wake of the looming economic headwinds.
Information technology, and communication services, among other growth segments, were the worst-hit segments. Generally, investors keep a distance from the growth sectors of the market during times of economic turmoil.
In 2022, inflation has stayed at its peak in multiple decades, and the US Federal Reserve raised its policy rates to the highest level in years to fight it. These two factors were among the main reasons that contributed to the significant losses in the broader market this year.
On the other hand, geopolitical tensions had bumped the commodity, especially energy and food prices this year, which have been the prime reason for the inflation. While the economy was coming out of the pandemic hit, the geopolitical turmoil acted as the negative catalyst for stagnating growth.
Meanwhile, the impact of the economic headwinds had also been witnessed in the company profits. While many companies have provided stronger operating results than previously anticipated, avoiding the ongoing market uncertainties, some companies, especially from the technology and communications sector, provided gloomy earnings.
The companies had to revisit their spending budget, especially on advertisements, due to the increasing interest rates and inflation. In addition, the strong dollar has also weighed on businesses.
So what the advertising sector does? The advertising segment, also known as the ad tech sector, focuses on improving the advertising buying or selling process through different applications and tools.
The sector generally relies on other emerging technology trends like artificial intelligence, etc., through which it aims to aid the advertisers in making proper ad-related spending depending on their target audience.
So, today, we will be discussing five advertising-related stocks, which include Alphabet Inc. (NASDAQ: GOOGL), The Trade Desk, Inc. (NASDAQ:TTD), Perion Network Ltd. (NASDAQ:PERI), Meta Platforms, Inc. (NASDAQ:META), and Omnicom Group Inc. (NYSE:OMC), and their recent stock and financial performances.
Alphabet Inc. (NASDAQ:GOOGL)
Alphabet is a leading technology company that generates significant revenue by selling advertising space to advertisers across its different platforms. The stock of the US$ 1.29 trillion market cap technology leader, also popular as the parent firm of Google, lost over 30 per cent YTD and around 29 per cent YoY.
However, the GOOGL stock added over five per cent through the December start and was at its 52-week low of US$ 83.34 on November 3, 2022. Meanwhile, in Q3 FY22, Alphabet Inc's revenue rose six per cent YoY to US$ 69.09 billion, and its diluted EPS was US$ 1.06 apiece, against US$ 1.40 per share in Q3 FY21.
The company's revenue from the YouTube ads segment was US$ 7.07 billion, while its total Google advertising revenue was US$ 54.48 billion. Its total Google advertising revenue totaled US$ 53.13 billion in the year-ago period.
The Trade Desk, Inc. (NASDAQ:TTD)
The major marketing-focused technology firm, The Trade Desk Inc, holds a market cap of US$ 26.58 billion. The firm's stock, which helps improve the relevancy of the advertisement experience, fell around 41 per cent YTD and about 39 per cent YoY.
The Trade Desk Inc's revenue rose 31 per cent YoY to US$ 395 million in Q3 FY22, while its diluted EPS was US$ 0.03 apiece, against US$ 0.12 per diluted share in Q3 FY21.
Perion Network Ltd. (NASDAQ:PERI)
The Israel-based technology firm Perion Network Ltd, had a P/E ratio of 16.37. The firm's stock, which offers several products and solutions focused on digital advertising services, rose 16 per cent YTD and about 19 per cent YoY.
The PERI stock gained over 45 per cent QTD through the December start and was at its 52-week high of US$ 28.1899 on December 2, 2022.
Perion Network Ltd's revenue rose 31 per cent YoY to US$ 158.6 million in Q3 FY22, while its GAAP net income jumped 141 per cent YoY to US$ 25.6 million. The technology firm's Display Advertising revenue surged 26 per cent YoY to US$ 86.8 million in Q3 FY22, and its Search Advertising revenue ticked up 38 per cent YoY to US$ 71.8 million.
Meta Platforms, Inc. (NASDAQ:META)
The leading technology firm that operates the social media platform Facebook, Meta Platforms Inc's P/E ratio is 11.77. The firm's stock, which enables users to run ads across its social media platforms, plunged 63 per cent YTD and around 60 per cent YoY.
Meta Platforms Inc's revenue declined four per cent YoY to US$ 27.71 billion in Q3 FY22, while its diluted EPS tumbled 49 per cent YoY to US$ 1.64 apiece. Its advertising revenue decreased to US$ 27.23 billion in Q3 FY22 from US$ 28.27 billion in the preceding year's same quarter.
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Omnicom Group Inc. (NYSE:OMC)
The major American media and marketing firm Omnicom Group Inc's dividend yield was 3.51 per cent. The firm's stock, which offers advertisement, CRM, and other related services, rose seven per cent YTD and about 14 per cent YoY.
Omnicom Group Inc's diluted EPS was 1.77 apiece on revenue of US$ 3.44 billion in Q3 FY22, against an income of US$ 1.65 per diluted share on revenue of US$ 3.43 billion in the year-ago period.
Bottom line:
PricewaterhouseCoopers or PwC, said that the online advertisement spending was over US$ 189 billion in the prior year, which was around 2.7 times higher than the total advertising spending on television ads. Notably, the television ad spending totaled about US$ 69.7 billion.
In addition, PwC estimates the online ad spending to reach about US$ 218 billion in the ongoing year, around three times higher than the television advertising spending. Besides, they expect the sector to grow with a CAGR of 7.99 per cent from 2021 through 2026.
However, as said earlier, the investors have stayed on the sideline this year due to the hovering concerns. But as the latest set of economic data showed that the inflation is cooling. At the same time, Fed officials also indicated an easing pace of their monetary campaign, and some industry watchers are optimistic about the segment.
Meanwhile, many big companies like Alphabet Inc (NASDAQ:GOOG), Meta Platforms, Inc. (NASDAQ:META), etc., have predicted gloomy earnings from their advertisement segments.
While the market has wiped off some of its losses this year in recent weeks, it still stays in the negative territory on a YTD level. Hence, the market participants should thoroughly evaluate the assets before making any spending plans.
