BMO Capital's Key Findings on Ad Stocks

BMO Capital analysts believe Google (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) are the top ad stocks heading into Q4 2024 and 2025, driven by their scale and advanced AI tools.

According to BMO’s recent research with advertising industry experts across the US, UK, and Canada, both companies are well-positioned to capture additional ad spend through optimized campaigns.

> “Specifically, our experts agree that META is best positioned to benefit from a TikTok ban, with YouTube and SNAP also benefiting to a lesser extent,” wrote BMO.

Experts highlighted Google’s Performance Max (PMax) as driving incremental revenue for search ads due to AI-driven improvements in return on ad spend (ROAS). However, YouTube faces challenges from sports engagement in events like Copa America and UEFA European Cup, but remains strong in the digital ad space.

BMO projects Meta’s revenue growth to be in the 10%-12% range for Q4 2024, predicting the lower end of this guidance due to a slowdown relative to H1. Nevertheless, Meta is expected to benefit from retail and social commerce, with in-app shopping ads generating higher CPMs.

Social commerce is anticipated to be a substantial growth driver for Meta, with transaction-related ads projected to increase from 8.2% to over 40% of total ad spend over time.

Connected TV (CTV) is also expected to contribute significantly to advertising growth, with Amazon (NASDAQ:AMZN) Prime Video and Netflix (NASDAQ:NFLX) recognized as the most strategically positioned platforms. Amazon’s Prime Video is moving from experimental ad spending to established budgets, while Netflix’s CPMs have dropped from $40 to $23, making it more appealing to advertisers.