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Ads are recovering and Publicis looks cheap

Why the traditional ad giant could thrive in the digital world
Ads are recovering and Publicis looks cheap
  • Publicis stands to gain as the advertising market rebounds this year 
  • The group trades at a discount other less digitally enabled peers 
Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points
  • Signs of recovery in advertising market
  • Acquisition of digital business Epsilon 
  • Cheaper than some ‘big four’ advertising agencies 
  • Decent margins and highly cash generative 
Bear points
  • Growing threat from consulting companies that specialise in marketing and digital transformation 
  • Digital ad market complicated by privacy issues 

Silicon Valley is a land of milk and honey for investors. More good news flowed from the west coast last week: Facebook (US:FB), Apple (US:AAPL), Amazon (US:AMZN) and Google (US:GOOGL) all beat expectations for their first quarter of the year – and all, spare Apple, benefited from a huge uptick in marketing spend online. Facebook’s average price per ad grew by around a third. Google’s operating income more than doubled to $16.4bn (£11.8bn). And Amazon’s lesser known (but huge) advertising business saw its revenues grow by almost three-quarters year on year. The message was clear: ads are coming back with a vengeance. 

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