We recently compiled a list of the . In this article, we are going to take a look at where Pegasystems Inc. (NASDAQ:PEGA) stands against the other advertising stocks.
When compared to the copy driven model of the late 1900s as popularized by shows such as Mad Men, the advertising era of 2024 is completely different. Today, advertisers have at their disposal the data of billions of people which they can characterize according to preference and target their ads to. This growth in digital advertising has been driven by the rise of video streaming platforms and digital publications, which continue to gain market share over paper newspapers.
Nowhere else is the impact of digital advertising in today's era clear as through the value of the world's largest search engine company. A mega cap stock, this firm has a market value of a whopping $2 trillion, making it . Yet, in another case of 2024 being a historic year of shifts for the technology industry as evidenced by technologies such as artificial intelligence, this firm is also facing the heat from the US government which might end up changing the very fabric of the industry.
The search engine giant, which earned $187 billion in trailing twelve month revenue from search and advertising, traces its roots back to the late 1990s when its founders created an algorithm called PageRank. This software determined which webpages were authoritative based on the amount and quality of backlinks they got, and as the engine grew, so did the firm's dominance in the global advertising industry as it processes more than 22 billion searches per day. However, this gravy train might be ending as a Washington judge ruled in August that its $26 billion in payments to other firms to make the platform the default option on their devices was an anti competitive behavior that locked others out in the industry.
Following the ruling, there are rumors that the Justice Department might be considering breaking the company up by making it divest its mobile software and web browsing business divisions. However, any such decision will require court approval which will force the firm to comply. And while a court victory is great for news headlines, the US government has rarely broken up large companies in the modern era.
The last such case was in 1982 through the breakup of the Bell System, and even if the browser and OS were made separate businesses, they are unlikely to survive on their own since both are provided to users for free. Not to mention, the long drawn nature of anti-trust action could take years, and end up being enforced when the industry is vastly different from what it is now. This is because artificial intelligence is gnawing at the heels of the industry, with products such as OpenAI's SearchGPT already in early stage releases.
Speaking of AI, it's also making its mark on the advertising industry. Just as advertisers are able to rely on millions of users' data through search and social media platforms, AI helps them navigate through this data in novel and new ways. As per McKinsey, marketing and sales could see a $931 billion productivity boost from AI through new features such as personalized campaigns and improved data use.
These use cases have already become apparent, with the largest social media company in the world regularly sharing updates about how it is using AI to make advertisers' jobs easier on its platform. Two tools that it offers are the Advantage+ and Advantage+ Shopping platform which enables advertisers and sellers to automate their campaign operations and determine the best advertisements to run. The platforms also appear to be driving results, with the that is "demonstrating 22% higher return on ad spend for US advertisers after they adopted Advantage+ Shopping campaigns" with revenue for the firm through the two AI platforms .
Speaking of revenue, the advertising industry's spending, which determines the fate of publishers is also determined by the state of the economy, consumer confidence, and advertisers' outlook. One such firm with brands in more than 100 companies shared during its that while the advertising market is not at its best right now, it does appear to be recovering. This recovery is taking place in areas such as food and technology which joins strong performance in healthcare, pharmaceuticals, and beauty care.
Another publisher, which is one of the most well known digital media and lifestyle platforms in the world that relies on programmatic advertising (data driven user targeting through ads), saw its during Q2 even as broader advertising revenue dropped by 19% annually. With these details in mind let's take a look at which advertising stocks to buy according to short sellers. For stocks that are driving advertising technology, you should check out .
To make our list of the best advertising stocks to buy according to short sellers, we listed the NASDAQ and NYSE listings of an advertising ETF by the percentage of shares outstanding that were sold short and selected the stocks with the lowest percentage. An added 23 stocks after an internet search were also analyzed, but all these had market caps below $300 million so they were excluded. For these stocks, we also mentioned the number of hedge fund investors.
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 ( ). An enthusiastic programmer working on a laptop, surrounded by screens displaying code.
Pegasystems Inc. (NASDAQ: ) Pegasystems Inc. (NASDAQ:PEGA) is an enterprise support software company that allows businesses to acquire customers and manage customer experiences.
When compared to some other advertising stocks on our list, it is a relatively smaller company despite having been set up in 1983, and as is characteristic with high growth cloud stocks, Pegasystems Inc. (NASDAQ:PEGA) is only sporadically profitable. This means that investors are hyper focused on its revenue growth and margins, with the share price contingent on these two metrics.
As a smaller company, Pegasystems Inc. (NASDAQ:PEGA) can benefit from quickly shifting its strategies to meet emerging trends, and it appears to be doing so with its Blueprint platform. Blueprint allows Pegasystems Inc.
(NASDAQ:PEGA)'s customers to use AI to generate different digital transformation strategies, and it sets its enterprise software apart from customers who are primarily focused on enabling businesses to write code and generate software. Pegasystems Inc. (NASDAQ:PEGA)'s management shared key details for Blueprint during the Q2 2024 earnings call: "Client discussions I’ve had since launch of Blueprint are some of the most positive I’ve had in the Pega 40-year history.
In fact, when our clients see what we delivered they quickly recognized for power and the opportunities. I believe that the energy and confidence in our vision is increasing — and is helping to drive the kind of results we’re talking about today. With tens of thousands of Pega Blueprints created over the last few months, we’re identifying opportunities to accelerate growth and creating additional momentum for Pega Cloud, which will contribute to monetization.
And we’ve barely scratched the surface of what we, our clients, and our partners can do with this game-changing technology, and we’re really energized by this. I do believe that Blueprint is fundamentally changing how we engage, sell and deliver with our clients." Overall PEGA on our list of the best advertising stocks to buy according to short sellers.
While we acknowledge the potential of PEGA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than PEGA but that trades at less than 5 times its earnings, check out our report about the . Disclosure: None.
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