Many of us have probably increased our screen and internet time since the coronavirus stay-at-home edicts, and one thing is probably for sure: the advertisers all over your Facebook and Twitter feeds are probably getting a very decent bang for their buck during this historic and unprecedented event.
Digital advertising has grown exponentially for years. While sometimes very annoying, it does allow all our favorite sites to remain free to use, and that’s something you can’t say about any other entertainment, sports and news outlets that you receive via cable, satellite or streaming over-the-top services.
A new Oppenheimer report looks at the leaders in the digital advertising world. The analysts feel confident that as the draconian measures used during the pandemic start to fade, these leaders will rebound faster than others will. The report noted four specific points about the industry and the transformations taking place during the crisis:
1) Requirements for businesses to digitally transform and unleash digital creativity for branding and messaging are accelerating during this crisis.
2) Second quarter digital advertising spending will be very bad. negatively impacting results before gradually improving in the second half of 2020.
3) We carry a downward bias to consensus revenue estimates for the software names but less so for margins, with managements showing solid cost discipline across the operating expense lines based on hiring data.
4) The industry incumbents are best-positioned post-crisis.
Three of those incumbents are rated Outperform at Oppenheimer, and all make sense for aggressive growth accounts looking to add companies that are dominant in a space that will continue to grow in the years to come.
Shares of this high-profile old-school software company have really backed up in price and are offering investors a very solid entry point. Adobe Systems Inc. (NASDAQ: ADBE) operates in three segments: Digital Media, Digital Marketing and Print and Publishing. The Digital Media segment provides tools and solutions that enable individuals, small and medium businesses, and enterprises to create, publish, promote and monetize their digital content.
Top Wall Street analysts see the company benefiting from artificial intelligence, predictive analytics, automation bots, speech recognition and natural language processing and image recognition.
The Oppenheimer team, like many across Wall Street, see the company as the best in class digital advertising play, and they said this in the research report:
Adobe is viewed as the gold standard in the market for digital creative solutions, and most large brands, enterprises and creative professionals have already standardized on its Digital Media products. We expect the current messaging shift in digital advertising to evolve as the economy moves through a downturn to a potential recovery in the second half of 2020 and boost demand for Adobe’s Digital Media and Experience products.
The Oppenheimer price target for the shares is $370, and the Wall Street consensus target was last seen at $338.54. Adobe Systems stock popped over 6% on Tuesday and closed at $340.76 a share.