What happens to digital ad inventories?


our theme Ed Tech Stocks — which includes players in internet platforms and ad technology — fell nearly 56% year-to-date as the U.S. and global economy faced a host of headwinds, compared to the Nasdaq-100, which fell nearly 29%. Duration. While growth stocks generally suffer from rising prices, high inflation and a slowing economy are also forcing companies to rethink their advertising budgets. This has a direct impact on revenue growth for ed-tech players. The most recent quarterly results from the major digital advertising players were weaker than expected. Major digital advertising provider Alphabet saw its profits fall 27% over the past year, while sales only increased 6%. Facebook parent company Meta Platforms also reported its second consecutive quarterly revenue decline in the third quarter and forecast another year-over-year decline in the fourth quarter.

However, there are also several redeeming factors. While the downturn is likely to affect the advertising market across the board, we think the downturn is already priced in. Customers are looking for a better return on their ad spend in a weak economy in favor of ad technologists. In addition, valuations in the sector are starting to look very attractive again. For example, Meta Platforms trades at just 14x 2023 consensus earnings, while Alphabet trades at around 18x 2023 earnings. It is very likely that growth for most of these companies will eventually pick up as the economy recovers and inflation calms down. which ultimately allows these stocks to receive a high rating.

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