Philip Van Dorn
Shares of online advertisers have been crushed.But the group could make a comeback, benefiting stalwart investors
Are you a contrarian investor? Sometimes it seems like everyone claims to be a member, but it’s not easy, especially after the fiasco we saw on September 13th.
An investor looking to make bigger gains at a low price needs to have the courage to step in when others are in a state of panic.
Here’s a list of companies in or related to this year’s most talked about industry: online advertising.
Most of the companies in this group are expected to grow their revenues much faster than the broader market over the next two years.
Back to the basics of Warren Buffett
Before looking at online advertisers, it’s a good idea to check out the following, even if you believe you’ve heard it before.
You may have summed up the group’s performance, some snippets, from Berkshire Hathaway CEO Warren Buffett’s 1986 letter to shareholders. Here’s a longer version of it:
Of course, common stocks are the most interesting. When the conditions are right—that is, when the economy and well-managed companies sell for well below intrinsic business value—stocks sometimes offer grand slam home runs.
Buffett then wrote that Berkshire cannot predict stock market performance.
What we do know, however, is that occasional outbreaks of the two super-contagious diseases of fear and greed will always happen in the investing world. The timing of these epidemics will be unpredictable. And the market aberrations they produce are equally unpredictable, both in duration and magnitude. Therefore, we never try to predict the arrival or departure of any one disease. Our goal is more modest: we just try to be fearful when others are greedy, and greedy only when others are fearful.
I bolded the last sentence. It’s easy to suggest that those hoping for big gains will buck the trend when the market gives them a chance. It is much harder to have enough confidence and patience to put an idea into practice.
As part of your own investment research, you should read Buffett’s recent letter to shareholders. All his letters can help you. They are listed here.
Defeated Online Advertising Group
The idea stemmed from Eric Jhonsa’s Twitter post:
Jhonsa pointed to the semiconductor industry, whose stocks have been hammered this year as chipmakers enter a down cycle due to pandemic-era shortages. Several of the industry’s largest manufacturers recently slashed their 12-month rolling consensus estimates for sales and earnings. Others bucked the trend.
Jhonsa provides a stock listing of only 21 online advertisers or companies that offer supporting software or services. Those stocks have been hit hard this year. For some, forward price-to-earnings ratios are relatively low right now, given how fast these companies are expected to grow. Analysts expect good performance from Jhonsa, the three stocks mentioned in the ticker, as shown below.
Looking ahead, here’s Jhonsa’s list, with analysts polled by FactSet agreeing on sales in 2022, 2023 and 2024. Sales estimates for 2024 apply to all but two companies. The group is ranked by projected sales growth in 2023 based on the following estimates:
Company Ticker Expected sales growth -- 2023 Two-year estimated sales CAGR through 2024 Estimated sales -- 2022 ($mil.) Estimated sales -- 2023 ($mil.) Estimated sales -- 2024 ($mil.) Market cap. ($mil.) Tremor International Ltd. ADR TRMR 28.7% N/A $303 $390 N/A $562 ironSource Ltd Class A IS 25.3% 23.4% $766 $960 $1,165 $2,716 Trade Desk Inc. Class A TTD 24.9% 26.0% $1,592 $1,989 $2,526 $28,351 Doximity Inc. Class A DOCS 24.7% 27.1% $408 $509 $659 $3,653 DoubleVerify Holdings Inc. DV 24.6% 24.1% $449 $560 $692 $4,709 Innovid Corp. CTV 24.6% 19.7% $130 $162 $186 $408 AppLovin Corp. Class A APP 20.2% 17.8% $2,975 $3,575 $4,131 $7,789 Inuvo Inc. INUV 19.5% N/A $89 $106 N/A $58 PubMatic Inc. Class A PUBM 19.0% 21.2% $279 $332 $410 $766 Zeta Global Holdings Corp. Class A ZETA 18.4% 20.2% $563 $667 $815 $1,321 Integral Ad Science Holding Corp. IAS 17.3% 19.8% $400 $470 $575 $1,265 Roku Inc. Class A ROKU 17.3% 21.6% $3,139 $3,682 $4,642 $8,216 Perion Network Ltd. PERI 16.2% 12.3% $629 $731 $794 $966 Snap Inc. Class A SNAP 15.9% 18.6% $4,635 $5,374 $6,523 $16,416 Digital Turbine Inc. APPS 15.3% 23.1% $767 $884 $1,163 $1,791 Pinterest Inc. Class A PINS 15.2% 17.7% $2,799 $3,224 $3,877 $14,333 Magnite Inc. MGNI 14.9% 17.6% $508 $583 $702 $988 Twitter Inc. TWTR 14.1% 16.7% $5,287 $6,034 $7,205 $31,941 Criteo SA ADR CRTO 13.8% 10.3% $973 $1,108 $1,184 $1,716 Alphabet Inc. Class A GOOGL 11.6% 11.9% $289,552 $323,097 $362,324 $625,503 Meta Platforms Inc. Class A META 10.2% 11.9% $117,850 $129,837 $147,512 $349,239 Source: FactSet
Click on the codes to learn more about each company, including company profiles, news, financials and stock performance.Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch Quotes page
We use calendar year estimates for a uniform set of numbers because many companies’ fiscal years do not match the calendar.
For companies for which consensus sales estimates are available through 2024, the table includes the expected two-year compound annual growth rate (CAGR).
By comparison, S&P 500 companies as a group are projected to increase sales by 4.2% through 2023 and a two-year sales compound annual growth rate of 4.5% through 2024.
By size, there are many companies on the list. On the low end, Inuvo Inc. (INUV), with a market cap of just $58 million, is a penny stock that has fallen from 53 cents at the end of 2021 to 48 cents a share on Sept. 13. Of the analysts surveyed by FactSet, only two cover the stock. All others on the list are covered by at least five analysts.
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