A man walks past the logo of the US multinational technology company Google during the VivaTech … [+]
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Our theme of Digital Advertising Stocks – which includes Internet platforms players and ad technology players – has underperformed a bit this year, rising by just about 15% year-to-date, compared to the broader S&P 500, which remains up by over 25% over the same period.
There are likely a couple of factors driving the recent underperformance. Firstly, some large advertisers are being more circumspect about advertising spending recently as they deal with logistical issues and semiconductor shortages which are holding up their ability to supply products. Secondly, smartphone behemoth Apple recently made privacy changes to its iOS operating system, essentially preventing advertisers from tracking iPhone users without their consent. The move is hurting the ad targeting abilities and revenues for some advertising players. Moreover, with Covid-19 cases on the decline and people increasingly heading out, investors are likely reducing exposure to the digital ad sector, which was a hot favorite through the pandemic.
However, this is probably a good time to look at the theme, as the secular trend of marketers shifting ad budgets from traditional channels to digital channels is likely to hold up over the long run. Within our theme, Google’s parent company Alphabet – the Internet’s largest search and video ad vendor – has been the strongest performer with its stock rising by about 70% year-to-date. On the other side, Magnite – one of the largest independent sell-side digital advertising platforms – has been the weakest performer with its stock down by about 22% year-to-date.
[9/14/2021] Digital Advertising Stocks Are Underperforming, Time To Buy?
Our theme of Digital Advertising Stocks – which includes Internet platforms players and ad technology players – has declined a bit since our last update in late July. The theme has returned about 16% year-to-date, underperforming the broader Nasdaq-100, which is up by about 22% over the same period. However, this is probably a good time to look at the theme, as the secular trend of marketers shifting ad budgets from traditional channels to digital channels is likely to only pick up following Covid-19, as people spend more time online. Moreover, with Covid proving more difficult to contain the initially thought due to the emergence of new variants, the trend of working, learning, and shopping from home could continue, boding well for digital ad stocks.
Within our theme, Google owner Alphabet – the Internet’s largest search and video ad vendor – has been the strongest performer with its stock rising by about 64% year-to-date. Social media titan Facebook has also done well, with its stock up by 38% year-to-date. Both stocks have benefited from a surge in online ad spending and also from the broader shift to value stocks, as both names trade at low multiples relative to their growth rates. On the other side, higher multiple growth names such as Roku and The Trade Desk have underperformed declining by about 3% and 11%, respectively.
[7/28/2021] Google’s Record Quarter Bodes Well For Digital Advertising Stocks</…….