We recently compiled a list of the 8 Best AdTech Stocks to Buy Now. In this article, we are going to take a look at where HubSpot, Inc. (NYSE:HUBS) stands against the other AdTech stocks.
It goes without saying that the advertisement technology industry happens to be an exciting and ever-evolving sector, as digital advertising continues to dominate the market trends and remains at the forefront when it comes to strategic marketing. According to industry data by Allied Market Research, the global AdTech market was pegged at $748.2 billion in 2021 and is expected to reach $2.9 trillion by 2031. This demonstrates a CAGR of ~14.7% from 2022 to 2031.
This growth comes off the back of growing digital and internet penetration, increased usage of advanced technology like AI and machine learning, improved prospects for the gaming industry, and growth in social media apps including Facebook, WhatsApp, and others. Some of the top trends dominating the AdTech industry include higher usage of connected TV (CTV) advertising, in-app advertising, and interactive ads.
Growth prospects of the AdTech industry
The AdTech market has been bifurcated into solution, advertising type, size of an enterprise, platform, etc. The AdTech industry includes a wide range of companies and products, such as demand-side platforms (DSPs), supply-side platforms (SSPs), ad exchanges, data management platforms (DMPs), and more. Experts are of the view that the global supply-side platform (SSP) market size should touch ~$117.32 billion by 2033. This means that the industry should compound at ~13.3% from 2023 to 2033. This growth is expected to stem from technological advancements, higher consumer demand, and supportive government policies.
In the same vein, the demand side platform software market size should touch US$120.1 billion by 2033 on the heels of an improved trend of programmatic advertising and, the need for better targeting along with measurement capabilities for online ads. While the AdTech industry seems promising, inclusion of artificial intelligence (AI) makes it even more appealing.
AI’s Role in AdTech – Opportunities and Challenges
Global AdTech industry continues to prepare for the complete deprecation of third-party cookies by Google, which makes up ~65% of the web browser market share. This transition seems to be a critical step for enabling user privacy and data security. Artificial Intelligence, because of its capability to process vast amounts of data, should play a crucial role.
Research suggests that ~54% of businesses believe that AI offers advertising cost savings and efficiencies and ~30% of marketing professionals decided to earmark more than 40% of their marketing budget to campaigns that are AI-executed. The advent of smart speakers, voice search, and podcasting can help advertisers in creating fresh avenues to connect with target audiences with the help of audio and voice technology.
While advertisers can exploit the opportunities available in the AdTech industry, they need to be wary about challenges such as Ad fraud. These frauds are caused mainly because of bot traffic, domain spoofing, or ad stacking. Some other challenges include inventory quality, ad creativity, and brand safety.
AI and ML are revolutionizing digital advertising by enabling advertisers to assess vast amounts of data in real time. As a result, the advertisers can make data-driven decisions for optimizing ad campaigns. Advertisers now use algorithmic advertising, personalization, and performance metrics to maximize ROI.
AI algorithms help in automating media buying, making sure that ads reach the target audience. Personalized ads can be delivered using AI-powered recommendation engines and these engines enable real-time tracking, which can help make quick adjustments to fuel success.
The global AdTech industry is expected to compound in the mid-teens range over the next decade. Given that it’s still early in its growth story, now is the time to look at some of the best AdTech stocks.
Our Methodology
For this article, we selected the holdings of SmartETFs Advertising & Marketing Technology ETF and ranked them in ascending order of the number of hedge funds holding stakes in them. For the purposes, we sifted through Insider Monkey’s hedge fund data for 1Q 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of software developers gathered around a monitor discussing a new CRM platform.
HubSpot, Inc. (NYSE:HUBS)
Number of Hedge Fund Holders: 55
HubSpot, Inc. (N5YSE:HUBS) offers a cloud-based marketing, sales, and customer service software platform. The applications provided by the company are available separately or packaged together.
Experts believe that the company’s stock trades at reasonable levels, given the company’s long-term growth and recent earnings. HubSpot, Inc. (NYSE:HUBS) released its 2Q 2024 earnings print, beating the analysts’ top-line and bottom-line estimates. Its revenue came in at $637.2 million in 2Q 2024, exhibiting a rise from $529.1 million reported in the year-ago quarter. The analysts were expecting $619 million. Top-line growth was aided by higher revenues from subscription and professional services.
Non-GAAP net income stood at $103.5 million or $1.94 per share. This compares to $71.8 million or $1.38 per share in the previous-year quarter. Analysts were expecting $1.63. Earnings were supported by innovation, consistent execution, higher average subscription, and an increase in total customers.
While the stock was having a decent run, the recent headlines weighed over the company’s stock price.
For several months, there was buzz on the street that Alphabet Inc. (NASDAQ:600G) is exploring an acquisition of HubSpot, Inc. (NYSE:HUBS). When the news broke in April 2024, the stock traded higher as the talks suggested a genuine interest from both parties. However, in July 2024, reports indicated that both companies were abandoning their efforts. Post this news, shares of HubSpot, Inc. (NYSE:HUBS) fell sharply, pulling the valuation below the levels before the news. Reuters reported that the US regulatory body indicated an increased aversion to large technology conglomerates getting bigger by taking an inorganic route.
However, experts believe that this news was a potential speed breaker and HubSpot, Inc. (NYSE:HUBS) is well-placed to take off. This is evident from the company’s 2Q 2024 results; where it gave strong full-year guidance. For FY24, it expects total revenue of between $2.567 billion – $2.573 billion.
Analysts at Piper Sandler covered the shares of HubSpot, Inc. (NYSE:HUBS), and reaffirmed their “Overweight” rating. The brokerage gave the price objective of $570.00 on 8th August 2024.
As of the end of the first quarter, 55 out of 920 hedge funds tracked by Insider Monkey held stakes in HubSpot, Inc. (NYSE:HUBS).
Overall HUBS ranks 6th on our list of the best AdTech stocks to buy. You can visit 8 Best AdTech Stocks to Buy Now to see the other AdTech stocks that are on hedge funds’ radar. While we acknowledge the potential of HUBS as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering strong returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than HUBS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.