3 Stocks to Watch From the Thriving Advertising & Marketing Industry
The Zacks Advertising and Marketing industry is expected to gradually reach the pre-pandemic healthy levelswith increased service activities. IPG, NEXN and PUBGY are likely to ride on the digital marketing surge and client-centric strategies.
The rise in service activities, increased digital marketing services, and the success of the work-from-home trend enable the Zacks Advertising and Marketing industry to counter the prevailing revenue softness.
Customer-centric approaches to business, digital strategies and technology investments are helping The Interpublic Group of Companies, Inc. IPG, Nexxen International Ltd. NEXN and Publicis Groupe S.A. PUBGY to sail through the current testing times.
About the Industry
The Zacks Advertising and Marketing industry comprises companies that offer an extensive range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, and in-store design services. Prominent players from the industry include Interpublic and Omnicom. The pandemic has changed the way industry players have conducted business and delivered services so far. Currently, the industry’s key focus is on channeling money and efforts toward media formats and devices. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating strategic initiatives and identifying sources of demand.
What's Shaping the Future of the Industry?
Economic Recovery: The sector is a major beneficiary of the broader economy and service activities. According to the “second” estimate released by the Bureau of Economic Analysis, GDP grew at an annual rate of 3% in the second quarter of 2024 compared with the 1.4% growth in the first quarter. Economic activities in the non-manufacturing sector are in good shape. Till August, The Services PMI measured by the Institute for Supply Management has stayed above the 50% mark in 48 of the past 51 months.
Reviving Demand: The industry is mature, with demand for services remaining stable over time. Revenues, income and cash flows are anticipated to gradually reach the pre-pandemic levels, aiding most industry players to pay out stable dividends.
Digital Marketing Gathering Steam:Digital media consumption has increased, with consumers spending more time on various media platforms and video-streaming services. Thus, agencies offering digital marketing services stand to gain, as these firms are better positioned to address the rapid change in customer preference.
Zacks Industry Rank Indicates Bright Near-Term Prospects
The Zacks Advertising and Marketing industry, housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #52. This rank places it in the top 21% of 252 Zacks industries.
The group’s Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and current valuation:
Industry's Price Performance
Over the past year, the Zacks Advertising and Marketing industry has underperformed the S&P 500 composite and the broader sector. The industry has gained 20.5% compared to the S&P 500 composite’s growth of 33.8% and the broader sector’s rally of 30.6% in the said time frame.
One-Year Price Performance
Industry's Current Valuation
Based on the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing advertising and marketing stocks, the industry is currently trading at 10.03X compared with the S&P 500’s 21.9X and the sector’s 24.39X.
Over the past five years, the industry has traded as high as 17.06X and as low as 7.62X, with the median being 10.78X, as the charts below show.
Price to Forward 12 Months P/E Ratio
Advertising Stocks to Consider
Here, we have presented three stocks that are well-positioned for near-term growth:
Nexxen International: This flexible advertising platform provider is driving growth in key performance areas, witnessed as record second quarter 2024 Contribution ex-TAC, programmatic revenues and CTV revenues, while also increasing Adjusted EBITDA 27% year over year. The positive results are attributed to enhanced momentum following a rebrand, improved sales execution, expanding CTV partnerships and better overall market conditions, all of which are strengthening Nexxen’s financial performance and competitive positioning.
The Zacks Consensus Estimate for the company’s 2024 EPS has been revised 47% upward over the past 60 days. Shares of Nexxen International have gained 57.1% in the past year. The company currently carries a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: NEXN
Publicis: The company is a provider of marketing, communications and digital business transformation services. It is witnessing strength across all regions, the United States, Europe and Asia Pacific, driven by strong momentum in account wins.
The Zacks Consensus Estimate for the company’s 2024 EPS has increased 1% to $2.04 over the past 60 days. Shares of Publicis have gained 57.1% in the past year. The company also currently carries a Zacks Rank #2.
Price and Consensus: PUBGY
Interpublic: An increasingly diverse workforce gives this global provider of advertising and marketing services a key competitive edge. The company continues to attract, acquire and develop strategic, creative and digital talent from diverse backgrounds to increase organic growth and strengthen its foothold in international markets.
Interpublic continues to invest in technology and internationalize its digital specialist agencies to keep pace with the rapidly evolving media landscape. The company has been enhancing its digital capabilities like search, social, user experience, content creation, analytics and mobile across its portfolio to maintain growth in the dynamic sector.
The Zacks Consensus Estimate for Interpublic’s 2024 EPS has increased 0.7% in the past 60 days to $2.82. Shares of the company have gained 12.1% in the past year. Interpublic currently carries a Zacks Rank #3 (Hold).
Price and Consensus: IPG
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Interpublic Group of Companies, Inc. (The) (IPG) : Free Stock Analysis Report
Publicis Groupe SA (PUBGY) : Free Stock Analysis Report
Nexxen International Ltd. Sponsored ADR (NEXN) : Free Stock Analysis Report