BMO: These 2 Ad Stocks Are Best Positioned for Q4

BMO Capital analysts have identified Google and Meta Platforms as leading advertising stocks heading into the fourth quarter of 2024 and into 2025. They credit the companies’ scale and advanced AI capabilities for their strong positions in the market.

Recent discussions with advertising industry experts highlighted trends across the U.S., U.K., and Canadian advertising landscapes, indicating that both companies are well-equipped to capture additional advertising spending. Their AI tools are instrumental in helping advertisers optimize their campaigns more effectively.

According to BMO, experts believe that Meta stands to gain the most from a potential TikTok ban, with YouTube and Snap also likely to benefit, albeit to a lesser extent.

Furthermore, Google’s Performance Max (PMax) has been noted for driving additional ad dollars toward search ads, thanks to AI-driven enhancements in return on ad spend (ROAS). Nevertheless, YouTube has encountered challenges due to competition from sports events like Copa America and UEFA European Cup during July. Despite these hurdles, Google remains a formidable entity in the digital advertising sector.

BMO anticipates that Meta will experience revenue growth of 10% to 12% for Q4 2024, although some experts suggest the growth may lean towards the lower end of this range due to a slowdown compared to the first half of the year. Nonetheless, Meta is expected to benefit from the rise of retail and social commerce, with in-app shopping ads yielding higher cost-per-thousand impressions (CPMs).

BMO’s analysts predict that social commerce will emerge as a significant growth driver for Meta, with transaction-related ads projected to increase from 8.2% to over 40% of total ad spending over time.

Connected TV (CTV) is also expected to be a vital component of advertising growth, with platforms like Amazon Prime Video and Netflix seen as particularly well-positioned. Analysts noted that Amazon has transitioned from exploratory ad spending to more committed budgets, while Netflix’s CPMs have decreased from $40 to $23, making it a more appealing option for advertisers.