The growth of digital advertising is driven by advancements in technology, shifting consumer behaviors, and increasing adoption of digital platforms by businesses of all sizes. Therefore, we look into sound digital advertising stocks, such as The Trade Desk, Inc. (TTD - Get Rating), Ziff Davis, Inc. (ZD - Get Rating), and PubMatic, Inc. (PUBM - Get Rating).

With an increasing number of users spending significant amounts of time on digital platforms such as social media, search engines, mobile apps, and websites, advertisers have unprecedented opportunities to reach their target audiences with precision and scale. These digital platforms offer diverse advertising formats, allowing advertisers to tailor their messages to specific demographics, interests, behaviors, and locations.

Additionally, the growth of e-commerce has played a pivotal role in driving digital advertising. Businesses leverage digital channels to promote online marketplaces, enhance brand visibility, and drive traffic to e-commerce platforms. The global digital advertising market is expected to grow at a CAGR of 15.5% by 2030.

Thus, keeping the immense potential of online marketing in mind, let us dig deeper into the fundamentals of the leading companies in the digital advertising space in detail:

The Trade Desk, Inc. (TTD - Get Rating)

TTD operates as a technology company in the United States and internationally. The company offers a self-service cloud-based platform that allows buyers to plan, manage, optimize, and measure data-driven digital advertising campaigns across various ad formats and channels, including video, display, audio, digital-out-of-home, native, and social on various devices, such as computers, mobile devices, televisions, and streaming devices.

TTD’s trailing-12-month EBIT margin of 16.2% is 66.45% higher than the industry average of 9.79%. Its trailing-12-month Return on Total Capital of 8.84% is 127.8% higher than the industry average of 3.88%. Also, its 23.48% trailing-12-month levered FCF margin is 159.1% higher than the industry average of 9.06%.

During the third quarter, which ended September 30, 2024, TTD saw robust growth, with revenues rising 13.6% year-over-year to $628 million. Adjusted EBITDA surged by 25.8% from the year-ago quarter to $257 million, while non-GAAP net income soared to $207 million, marking a 28.6% increase from the prior year’s quarter. Earnings per share reached $0.41, up by 31.7% year-over-year.

For the quarter ending December 2024, TTD’s revenue is expected to increase 25.4% year-over-year to $759.47 million. Its EPS is expected to grow 38.6% year-over-year to $0.57. Moreover, the company surpassed the consensus revenue estimates in each of the trailing four quarters, which is impressive.

TTD’s stock has soared 100.5% over the past year to close the last trading session at $136.36.

TTD’s POWR Ratings reflect this outlook. The stock has an A grade for Growth and a B for Sentiment and Quality. It is ranked #46 in the 126-stock Software – Application industry. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

Beyond what is stated above, we’ve also rated TTD for Momentum, Stability, and Value. Get all TTD ratings here.

Ziff Davis, Inc. (ZD - Get Rating)

ZD operates as a digital media and internet company in the United States and internationally. The company offers PCMag, an online resource; Mashable for publishing technology and culture content; Spiceworks Ziff Davis provides digital content of IT products and services; retailMeNot, a savings destination platform; Offers.com, a coupon and deals website; and event-based properties.

ZD’s trailing-12-month EBIT margin of 14.57% is 48.9% higher than the industry average of 9.79%. Its trailing-12-month Return on Total Capital of 21.10% is 474.8% higher than the industry average of 3.67%. Also, its 23.11% trailing-12-month levered FCF margin is 155.1% higher than the industry average of 9.06%.

For the third quarter that ended September 30, 2024, ZD’s total revenues increased 3.7% year-over-year to $353.6 billion. The company’s adjusted net income came in at $72.10 million or $1.64 per share, up 4.3% and 9.3% from the previous year’s quarter, respectively.

Analysts expect ZD’s revenue and EPS for the fourth quarter (ending December 2024) to increase 8.9% and 13% year-over-year to $424.40 million and $2.63, respectively. Also, the company has topped the consensus EPS estimates in three of the trailing four quarters.

ZD’s shares have gained 22.9% over the past month and 24.3% over the past three months to close the last trading session at $57.72.

ZD’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.

It has a B grade for Growth and Value. The stock is ranked #5 out of 16 stocks in the Advertising industry.

Click here to access the additional ZD ratings (Sentiment, Quality, Momentum, and Stability).

PubMatic, Inc. (PUBM - Get Rating)

PUBM is a technology company that engages in the provision of a cloud infrastructure platform that enables real-time programmatic advertising transactions for digital content creators, advertisers, agencies, agency trading desks, and demand side platforms worldwide. 

On November 22, 2024, PUBM and DIGITS, a leading independent retail media agency, announced their strategic partnership to leverage PUBM’s Convert, a scalable full-funnel commerce media platform, to monetize digital grocery advertising inventory and audiences programmatically with omnichannel, closed-loop reporting.

With digital grocery shopping in the United States projected to surpass $200 billion for the first time in 2024, this partnership will empower a robust network of regional grocers, convenience stores, and digital commerce platforms to capitalize on this tremendous growth with unprecedented ad tech capabilities.

PUBM’s trailing-12-month gross profit margin of 65.46% is 25.4% higher than the industry average of 52.21%. Its trailing-12-month net income margin of 5.96% is 71.5% higher than the industry average of 3.48%. Also, its 17.17% trailing-12-month levered FCF margin is 89.5% higher than the industry average of 9.06%.

During the third quarter, which ended September 30, 2024, PUBM saw robust growth, with revenue rising 13% year-over-year to $71.80 million. Adjusted EBITDA surged by 1.6% from the year-ago quarter to $18.5 million, while its non-GAAP net income and non-GAAP earnings per share reached $6.6 million and $0.12, respectively.

For the quarter ending December 2024, PUBM’s revenue is expected to increase 4.4% year-over-year to $88.36 million. Its EPS is expected to be $0.24. Moreover, the company surpassed the consensus EPS estimates in each of the trailing four quarters, which is impressive.

PUBM’s stock has soared 11% over the past month to close the last trading session at $16.10.

PUBM’s POWR Ratings reflect its prospects. The stock has a B grade for Quality and Sentiment.

Beyond what is stated above, we’ve also rated PUBM for Momentum, Stability, Growth, and Value. Get all PUBM ratings here.

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TTD shares were trading at $138.11 per share on Friday afternoon, up $1.75 (+1.28%). Year-to-date, TTD has gained 91.93%, versus a 28.97% rise in the benchmark S&P 500 index during the same period.

About the Author: Nidhi Agarwal

Nidhi is passionate about the capital market and wealth management, which led her to pursue a career as an investment analyst. She holds a bachelor's degree in finance and marketing and is pursuing the CFA program. Her fundamental approach to analyzing stocks helps investors identify the best investment opportunities. More...

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