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With rising demand for online marketplaces, companies have been increasing their digital footprints. The trend is also driving an increased focus on digital marketing. As a result, we think Adobe (ADBE), América Móvil (AMX), Interpublic Group (IPG), and TEGNA (TGNA), which facilitate digital marketing, could be big winners. Let’s look closer at these names.
Digital advertising has been gaining traction since the onset of the COVID-19 pandemic last year because businesses have been focusing on establishing or increasing their digital presence. The rapid transformation from traditional advertising to digital marketing has caught the attention of investors worldwide. This is evidenced by iShares Evolved U.S. Media and Entertainment ETF’s (IEME) 60.9% returns over the past year versus SPDR S&P 500 ETF Trust’s (SPY) 45.1% gains.
Businesses will likely invest heavily in digital marketing platforms in the future as online shopping becomes the preferred option over traditional brick-and-mortar stores. This s why the global digital marketing market is expected to grow at a 17.6% CAGR over the next five years to reach $807 billion by 2026.
Given the industry’s solid growth prospects, we think digital marketing facilitators Adobe Inc. (ADBE), América Móvil, S.A.B. de C.V. (AMX), The Interpublic Group of Companies, Inc. (IPG), and TEGNA Inc. (TGNA) have the potential to deliver solid returns this year.
Adobe Inc. (ADBE)
ADBE operates as a diversified software company. It provides digital marketing and media solutions worldwide. The company operates through three segments—Digital Media, Digital Experience, and Publishing and Advertising. It offers its products and services directly to enterprise customers through its sales force and local field offices, as well as to end users through app stores and through its website at adobe.com.
On April 27, ADBE announced the next generation of its Real-time Customer Data Platform (CDP) that helps brands activate known and unknown customer data to manage the entire customer profile and journey seamlessly in one system, without the need for third-party cookies. Because third-party cookies will not be supported in browsers from now on, adopting a first-party data strategy allows companies to provide customers with the most relevant, personalized experience by only using the information that customers choose to share. ADBE hopes this industry’s first CDP will generate high demand from various companies.
Also in April, ADBE and FedEx Corporation (FDX) announced a new, multi-year collaboration, beginning with the integration of ShopRunner, an FDX subsidiary and a leading e-commerce platform, with Adobe Commerce. The integration will give ADBE merchants access to FDX post-purchase logistics intelligence, which will help them better manage their shipping and logistics, thus driving demand, reducing cost and gaining customer insights to capitalize on e-commerce growth.
During its fiscal year 2021 first quarter, ended March 5, ADBE’s total revenue increased 26.3% year-over-year to $3.91 billion. The company’s gross profit came in at $3.46 billion, which represents a more than 31% gain from the prior-year period. ADBE’s non-GAAP operating income was $1.83 billion for the quarter, up 46.9% from the prior-year period. While its non-GAAP net income increased 36.9% year-over-year to $1.11 billion, its non-GAAP EPS increased 38.3% year-over-year to $3.14.
A $2.82 consensus EPS estimate for the current quarter, ending May 31, represents a 14.7% year-over-year improvement. ADBE surpassed the Street’s EPS estimates in each of the trailing four quarters. The $3.73 billion consensus revenue estimate for the current quarter represents a 17.9% rise from the prior-year period. Analysts expect the stock’s EPS to grow at 17.5% per annum over the next five years. ADBE climbed 32.2% over the past year to close yesterday’s trading session at $482.74.
ADBE’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
The stock has an A grade for Quality, and a B grade for Sentiment. We have also graded ADBE for Value, Growth, Stability and Momentum. Click here to access all ADBE’s ratings.
América Móvil, S.A.B. de C.V. (AMX)
AMX is a Mexican-based company that provides telecommunications services worldwide. The company offers mobile and fixed-line voice services, wireless and fixed data services, Internet access and pay television, sales of equipment, accessories and computers, as well as other related services. It sells its brands through a network of retailers and service centers to retail customers and through sales force to corporate customers.
On February 23, AMX’s wholly owned Dutch subsidiary América Móvil B.V. completed the placement of approximately €2.10 billion ($2.56 billion) of senior, unsecured bonds exchangeable into ordinary shares of Koninklijke KPN N.V. The aggregate proceeds from the Bonds will be approximately €2.2 billion ($2.69 billion) and is likely to be used for AMX’s general corporate purposes.
For its fiscal year 2021 first quarter, ended March 31, AMX’s total revenue from the Peru segment came in at 1.44 billion soles ($388.17 million), which represented an 11.5% year-over-year improvement. Its COL$3.55 trillion ($96 billion) in total revenues from its Columbia segment represents a 9.8% rise from the prior-year period. The company’s net income is reported to be Mex$1.81 billion ($89.05 million) for the quarter, compared to a net loss of Mex$28.86 billion ($1.45 billion) in the first quarter of 2020. Its earnings per ADR came in at $0.03, compared to a loss of $0.44 in the prior-year period.
Analysts expect AMX’s EPS to improve 15.4% year-over-year for the current quarter, ending June 30, 2021 to $0.30. And its $12.20 billion consensus revenue estimate for the current quarter represents a 13% rise on a year-over-year basis. Analysts expect the stock’s EPS to grow at 9.3% per annum over the next five years. AMX ended yesterday’s trading session at $14.96, surging 22.4% over the past year. During the past nine months, the stock has plunged 15.2%.
AMX’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to Buy in our POWR Ratings system.
The stock has a B grade for Value, Stability and Quality also. In addition to the POWR Ratings grades we’ve just highlighted, one can see AMX’s ratings for Growth, Momentum and Sentiment here.
AMX is ranked #7 of 51 stocks in the B-rated Telecom – Foreign industry.
The Interpublic Group of Companies, Inc. (IPG)
IPG provides advertising and marketing services to companies worldwide. The company offers consumer advertising, digital marketing, communications planning and media buying, public relations, and specialized communications disciplines, as well as data management services.
On May 11, Primis, a video discovery platform for global publishers owned by IPG and Universal McCann, launched Sellers.guide, an industry-wide initiative designed to bring a heightened level of transparency to the ad tech ecosystem. Amid the widespread adoption of ads.txt files nowadays, this automated tool provides simple and useful feedback to help publishers and buyers combat malpractice in ads.txt files and establish a digital programmatic supply chain, thus avoiding unauthorized reselling, domain spoofing, latency and revenue loss. The company expects to generate good sales for this platform in the near-term.
In an announcement on May 7, IPG Mediabrands, an IPG media and marketing solutions division, said it will invest a minimum of 5% in Black-owned media by 2023. Following the successful launch of this year’s first-ever Equity Upfront, this investment should further boost innovation and growth, thus providing brands to reach diverse audiences in a supportive, meaningful manner.
For its fiscal year 2021 first quarter, ended March 31, IPG’s net revenue came in at $2.03 billion, which represented an improvement of 2.8% year-over-year. The company’s operating income was $243 million, representing a 220.2% rise from the prior-year period. Its non-GAAP net income increased 301.4% year-over-year to $177.40 million. Its non-GAAP EPS increased 309.1% year-over-year to $0.45.
Analysts expect IPG’s EPS for the current quarter, ending June 30, 2021, to be $0.41, up 78.3% year-over-year. It surpassed the Street’s EPS estimates in each of the trailing four quarters. For the current quarter, analysts expect IPG’s revenue to be $2.07 billion, representing a 11.6% rise from the prior-year period. The stock’s EPS is expected to grow at 14.1% per annum over the next five years.
IPG has gained 111.9% over the past year and 75.3% over the past nine months. It closed yesterday’s trading session at $32.57.
It’s no surprise that IPG has an overall B rating, which equates to Buy in our POWR Ratings system. It has a B grade for Growth, Momentum and Quality. To see additional POWR Ratings for IPG’s Sentiment, Value and Stability, click here.
IPG is ranked #2 of 14 stocks in the Advertising industry.
TEGNA Inc. (TGNA)
TGNA is a media company that operates television stations, delivering television programming and digital content. The company also owns multicast networks, including True Crime Network and Quest. Its TEGNA Marketing Solutions (TMS) delivers results for advertisers across television and digital platforms, as well as over-the-top (OTT) platforms, including Premion OTT advertising network.
At the IAB NewFronts digital media marketplace on April 4, TGNA announced that TGNA Attribution, in partnership with Arrivalist, a travel and tourism intelligence company, and IHS Markit, will provide industry-specific performance data for the automotive and tourism industries this year. The company expects these new attribution offerings will allow clients to advertise with TEGNA and Premion, an industry-leading company providing solutions for regional and local advertisers, with greater confidence.
On April 5, TGNA announced the debut of Twist Entertainment Network, its women-oriented multicast channel that will feature lifestyle and reality programming. The company hopes to foster an expanding customer base in the near-term amid the increasing numbers of viewers for lifestyle and reality shows.
TGNA’s revenues increased 6.3% year-over-year to $727.05 million for its fiscal year 2021 first quarter, ended March 31. Its non-GAAP operating income came in at $199.11 million, up 11.1% from the prior-year period. Its non-GAAP net income of $114.98 million for the quarter represents a 23.3% improvement from the prior-year period. The company’s non-GAAP EPS increased 20.9% year-over-year to $0.52.
A $0.49 consensus EPS estimate for the current quarter, ending June 30, 2021, represents a 308.3% improvement year-over-year. TGNA achieved and surpassed consensus EPS estimates in each of the trailing four quarters. The $730.64 million consensus revenue estimate for the current quarter represents a 26.5% rise from the prior-year period. Analysts expect the stock’s EPS to grow 10% over the next five years. The stock has gained 91.3% over the past year to close yesterday’s trading session at $19.38.
TGNA’s POWR Ratings reflect its solid prospects. The company has an overall B rating, which translates to Buy in our proprietary ratings system.
TGNA has a B grade for Value. In addition to the POWR Ratings grades we’ve just highlighted, one can see TGNA’s ratings for Growth, Stability, Sentiment, Quality and Momentum here.
Out of 11 stocks in the B-rated Entertainment – Broadcasters industry, TGNA is ranked #2.
ADBE shares were trading at $482.38 per share on Tuesday afternoon, down $0.36 (-0.07%). Year-to-date, ADBE has declined -3.55%, versus a 10.86% rise in the benchmark S&P 500 index during the same period.
Adobe is a part of the Entrepreneur Index, which tracks 60 of the largest publicly traded companies managed by their founders or their founders’ families.
About the Author: Sweta Vijayan
Sweta is an investment analyst and journalist with a special interest in finding market inefficiencies. She’s passionate about educating investors, so that they may find success in the stock market.
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