Chicago, IL – March 13, 2025 – Today, Zacks Equity Research discusses Stagwell Inc. STGW and Fluent, Inc. FLNT.
Link: https://www.zacks.com/commentary/2429228/2-advertising-marketing-stocks-to-watch-amid-industry-woes
The rise in service activities, increased digital marketing services, and the success of the work-from-home trend enable the Zacks Advertising and Marketing industry to counter the prevailing revenue softness.
Customer-centric approaches to business, digital strategies, and technology investments are helpingStagwell Inc. and Fluent, Inc. to sail through the current testing times.
The Zacks Advertising and Marketing industry comprises companies that offer an extensive range of services, including advertising, branding, content marketing, digital/direct marketing, digital transformation, financial/corporate business-to-business advertising, graphic arts/digital imaging, healthcare marketing and communications, and in-store design services. Prominent players from the industry include Interpublic and Omnicom.
The pandemic has changed the way industry players have conducted business and delivered services so far. Currently, the industry's key focus is on channeling money and efforts toward media formats and devices. To position themselves suitably in the post-pandemic era, service providers are increasing their efforts toward formulating strategic initiatives and identifying sources of demand.
Economic Recovery: According to the Bureau of Economic Analysis, the economy remained resilient, with GDP growing 2.8% in 2024, slightly below the 2.9% growth recorded in 2023. Non-manufacturing activities remained robust, as evidenced by the Services PMI, which stayed above the 50% threshold for the 54th time in 57 months, indicating sustained expansion since the post-pandemic recovery.
Reviving Demand: The industry is mature, with demand for services remaining stable over time. Revenues, income and cash flows are anticipated to gradually reach pre-pandemic levels, aiding most industry players in paying out stable dividends.
Digital Marketing Gathering Steam: Digital media consumption has increased, with consumers spending more time on various media platforms and video-streaming services. Thus, agencies offering digital marketing services stand to gain, as these firms are better positioned to address the rapid change in customer preference.
The Zacks Advertising and Marketing industry, housed within the broader Zacks Business Services sector, currently carries a Zacks Industry Rank #184. This rank places it in the bottom 26% of 248 Zacks industries
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates underperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
Before we present a few stocks that you may want to consider for your portfolio, let's take a look at the industry's recent stock market performance and current valuation:
Over the past year, the Zacks Advertising and Marketing industry has underperformed the S&P 500 composite and the broader sector. The industry has declined 16% compared to the S&P 500 composite's growth of 8.7% and the broader sector's rally of 8.7% in the said time frame.
Based on the forward 12-month price-to-earnings (P/E) ratio, which is commonly used for valuing advertising and marketing stocks, the industry is currently trading at 9.14X compared with the S&P 500's 20.48X and the sector's 24.15X.
Over the past five years, the industry has traded as high as 17.59X and as low as 7.89X, with the median being 9.14X.
Here, we have presented two stocks that are well-positioned for near-term growth:
Fluent: The key growth driver of this data-driven digital marketing services provider is Commerce Media Solutions, which is excelling, with fourth-quarter 2024 revenues surging 139% year over year and full-year 2024 revenues climbing 284%, driven by the addition of top-tier media partners. With current visibility, the company anticipates sustaining triple-digit year-over-year revenue growth for Commerce Media Solutions in 2025.
The Zacks Consensus Estimate for the company's 2025 bottom line has been revised from a loss of 52 cents to a loss of 43 cents over the past 60 days. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Stagwell: The company provides digital transformation, performance media and data, consumer insights and strategy, and creativity and communications services. It stands out for its digital-first marketing approach, strong client relationships and data-driven solutions. Its focus on AI, analytics, and media innovation drives growth. Strategic acquisitions expand its capabilities, while cost efficiencies and global reach enhance profitability, positioning it as a competitive player in modern advertising and marketing.
The Zacks Consensus Estimate for Stagwell's 2025 EPS has increased 5% in the past 60 days. It currently carries a Zacks Rank #3 (Hold).
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