The advertising industry is a dynamic and ever-evolving sector that plays a crucial role in connecting businesses with consumers. It encompasses a wide range of activities and strategies aimed at promoting products, services, and brands to target audiences through various channels and platforms.
Given the industry’s wide-ranging scope, it could be wise to scoop up the shares of fundamentally sound stocks Ziff Davis, Inc. (ZD), Criteo S.A. (CRTO), and Cimpress plc (CMPR), which seem poised to flourish with their constant innovative strategies.
As a multifaceted and ever-evolving business, the advertising sector has witnessed dynamic shifts and embraced diverse strategies, navigating a multitude of directions. Projections indicate a promising future for the U.S. ad industry, with anticipated revenue growth of 2.6% in 2023, reaching an all-time high of $352 billion.
Although inflationary pressures and a slowdown in global economic growth have squeezed the marketing expenses of various organizations, the industry seems to be in good shape, backed by the service sector’s growth. The Services PMI measured by the Institute for Supply Management registered a 0.7% growth from March 2023 to April 2023, touching 51.9%.
Moreover, as consumers spend more time on various media platforms and video-streaming services, the digital advertising market is anticipated to exhibit resilience compared to the broader advertising industry. With the growing dominance, digital advertising accounted for 67% of total global ad revenue last year and is expected to grow to 70% by 2025.
As the advertising sector remains an essential component of the business ecosystem, fueling economic growth, supporting media platforms, and shaping the way brands communicate with their target audiences, the global advertising market is projected to reach $834.9 billion by 2028, growing at a 5.2% CAGR.
Let us evaluate the stocks mentioned above in detail.
Ziff Davis, Inc. (ZD)
ZD is a digital media and internet company that operates through two segments: Digital Media; and Cybersecurity and Martech. The Digital Media segment operates a portfolio of web properties and apps, while the Cybersecurity and Martech segment provides cloud-based subscription services.
On April 6, ZD announced that it had acquired Lifehacker Technology in the first quarter of 2023. This acquisition aims to bolster its worldwide customer base, grant entry into new markets, and enhance the company's product lineup.
For the first quarter that ended March 31, 2023, ZD’s total revenue amounted to $307.14 million, while its adjusted net income came in at 51.73 million and $1.10 per share, respectively. Its total operating costs and expenses declined 1.3% from the prior-year quarter to $280.83 million.
During the same period, its total current assets and cash and cash equivalents amounted to $1.11 billion and $721.50 million, up 2.1% and 10.5% compared to $1.08 billion and $652.79 million, respectively, for the period that ended December 31, 2022.
Street expects ZD’s revenue to increase marginally year-over-year to $344.70 million for the third quarter (ending September 30, 2023), while its EPS is expected to be $1.55 in the same period. Its EPS is expected to increase by 4.6% per annum in the next five years. Moreover, it surpassed the EPS estimates in three of the trailing four quarters.
Its revenue has grown at a 3.9% CAGR over the past five years, while its total assets have increased at a 1.5% CAGR over the past three years.
The stock has lost marginally over the past five days to close the last trading session at $63.33.
ZD’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Growth, Value, and Quality. In the 17-stock Advertising industry, it is ranked #3. To see additional POWR Ratings of ZD for Momentum, Stability, and Sentiment, click here.
Criteo S.A. (CRTO)
Headquartered in Paris, France, CRTO is a technology company that provides marketing and monetization services on the open Internet. Its solution consists of the Criteo Engine, the company's data assets, access to inventory, and its advertiser and publisher platforms.
On April 27, CRTO announced the next phase of its integration with Shopify, a leading provider of internet infrastructure for commerce. In a significant development, CRTO’s app is now available on the Shopify App Store, enabling thousands of merchants and clients in the United States to access it.
This integration allows seamless connection with CRTO's network, leveraging personalized marketing, targeting high-intent buyer audiences, and improving customer retention to drive business growth.
On March 7, CRTO announced the acquisition of Brandcrush, an Australian company specializing in omnichannel retail media. This acquisition enables CRTO to offer a comprehensive omnichannel monetization solution on a global scale, allowing retailers to effectively manage their media inventory across both online and physical retail environments.
Additionally, this strategic move expands CRTO's presence and capabilities in the fast-growing Asia-Pacific retail media market, solidifying its position as a global leader in retail media.
CRTO’s revenue stood at $445.02 million in the first quarter (ended March 31, 2023), while its gross profit amounted to $181.51 million. The company’s adjusted net income came in at $28.01 million and $0.46 per share, respectively, for the same period. During the same period, its total current liabilities amounted to $992.92 million, declining 8.1% versus $1.08 billion as of December 31, 2022.
Analysts expect CRTO’s revenue and EPS for the third quarter (ending September 30, 2023) to increase 10.2% and 5.1% year-over-year to $235.11 million and $0.56, respectively. Moreover, it surpassed the EPS estimates in three of the trailing four quarters, which is impressive.
Its levered FCF has increased at a CAGR of 34.6% over the past three years, while its total assets have improved at a 9.4% CAGR in the same period.
CRTO’s shares have gained 25.1% over the past year to close the last trading session at $32.14.
It’s no surprise that CRTO has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Value and a B for Sentiment. Out of 17 stocks in the same industry, it is ranked #2.
In addition to the POWR Ratings we stated above, we also have CRTO ratings for Growth, Momentum, Stability, and Quality. Get all CRTO ratings here.
Cimpress plc (CMPR)
Based in Dundalk, Ireland, CMPR provides various mass customization of printed and digital marketing products; internet-based canvas-print wall décor, business signage, and other related products. The company operates through five segments, Vistaprint; PrintBrothers; The Print Group; National Pen; and All Other Businesses.
CMPR’s revenues increased 12.9% year-over-year to $742.16 million in the third quarter (ended March 31, 2023), while its adjusted EBITDA rose 105.7% from the year-ago value to $69.15 million. During the same period, its total current liabilities amounted to $675.59 million, declining 2.4% compared to $692.54 million as of June 30, 2022.
The consensus revenue estimate of $793.46 million for the fourth quarter (ending June 30, 2023) represents a 9.8% improvement year-over-year. The consensus EPS estimate for the current quarter is expected to be $0.27. Moreover, its EPS is expected to increase by 20% per annum in the next five years.
Also, CMPR’s revenue increased at a CAGR of 3.3% and 3.6% over the past three and five years, respectively.
The stock has gained 82.1% over the past six months and 83.4% year-to-date to close the last trading session at $50.64.
CMPR’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value and Quality. Within the same industry, it is ranked first. Click here to see the other ratings of CMPR for Momentum, Stability, and Sentiment.
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ZD shares were trading at $61.54 per share on Wednesday afternoon, down $1.79 (-2.83%). Year-to-date, ZD has declined -22.20%, versus a 7.69% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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