The online advertising industry is alive and well.
As regulators, prosecutors and lawmakers scrutinize
(ticker: FB) and Alphabet (GOOGL), the parent company of Google, investors continue to find stocks attractive. They forecast substantial growth for both revenue and sales.
Analyst Brian Nowak delved into the industry in a new research report, forecasting 20% ââgrowth in online advertising in 2021. He named Facebook, Alphabet and
(PINS) as its top pick, although it raised its price targets for a larger group of internet stocks:
Facebook at $ 340, from $ 315
Alphabet at $ 2,050, starting at $ 1,880
Pinterest at $ 80, from $ 73
Twitter (TWTR) at $ 50, from $ 42
Snap (SNAP) at $ 46, from $ 36
Quotient (QUOT) at $ 7.80, from $ 7.60
Criteo (CRTO) at $ 16, from $ 13
Yelp (YELP) at $ 26, from $ 19
Zillow (Z) at $ 148, from $ 118.
Nowak said Morgan Stanley anticipates a “check mark macroeconomic recovery,” with 7% nominal growth in U.S. gross domestic product in 2021, and that the strength of e-commerce will provide a tailwind to online advertising. The 20% growth in online advertising the bank forecasts would be an acceleration of 16% in 2019 and 11% in 2020, he noted.
He also sees a shift towards shopping via social media, a trend that would benefit Facebook, Pinterest and Snap (ticker: SNAP). Nowak noted that a recent poll found that 28% of Americans already use Instagram shopping at least once a month.
Nowak also notes that there has been a structural change in ad buyer behavior as homebound consumers shop online, accelerating advertisers’ transition to digital options and moving away from other alternatives. It is a potential source of online advertising growth for years to come, he said.
One area to watch, he says, is the growing interest by advertisers in capitalizing on the rise of shorthand video platforms like TikTok, Instagram Reels, Facebook Stories, and various others. âThis growing commitment to short videos, combined with the growing interest from advertisers [to] Reaching ad-supported video audiences creates an important new monetization lever to watch for all of these platforms, âhe wrote.
As for his top picks, Nowak writes that he’s the most bullish on Facebook, anticipating a better performance in 2021 than Wall Street expected. The stock is âGARPY,â he says, which means it offers growth at a reasonable price. The shares are trading for a modest 13 times Nowak’s estimate for earnings before interest, taxes, depreciation and amortization, or Ebitda, from 2022, with expected annualized growth of 17% through 2024.
He is also optimistic about Alphabet, in part because he expects a resumption of travel advertising, which he says represents 12% to 15% of paid search, but also because of the strong trends on YouTube. He also sees an attractive sum in the parts trade, noting that improved information on Google Cloud “shines a better light” on an asset he says could be worth as much as $ 375 billion. He says the company’s coins together could be worth as much as $ 2,450 a share, which is up about 40%.
On Pinterest, he sees âthe combination of new products / tools and consumer behavior shifting towards social shopping, which increases revenueâ.
Shares of Facebook, Alphabet and Pinterest were all slightly higher on Tuesday. the
gained 0.5% in the early afternoon.
Write to Eric J. Savitz at [email protected]