We recently compiled a list of the 10 Best Advertising Stocks to Buy According to Short Sellers. In this article, we are going to take a look at where Salesforce, Inc. (NYSE:CRM) stands against the other advertising stocks.
When compared to the copy driven model of the late 1900s as popularized by shows such as Mad Men, the advertising era of 2024 is completely different. Today, advertisers have at their disposal the data of billions of people which they can characterize according to preference and target their ads to. This growth in digital advertising has been driven by the rise of video streaming platforms and digital publications, which continue to gain market share over paper newspapers.
Nowhere else is the impact of digital advertising in today’s era clear as through the value of the world’s largest search engine company. A mega cap stock, this firm has a market value of a whopping $2 trillion, making it one of the largest companies in the world in terms of market value. Yet, in another case of 2024 being a historic year of shifts for the technology industry as evidenced by technologies such as artificial intelligence, this firm is also facing the heat from the US government which might end up changing the very fabric of the industry.
The search engine giant, which earned $187 billion in trailing twelve month revenue from search and advertising, traces its roots back to the late 1990s when its founders created an algorithm called PageRank. This software determined which webpages were authoritative based on the amount and quality of backlinks they got, and as the engine grew, so did the firm’s dominance in the global advertising industry as it processes more than 22 billion searches per day. However, this gravy train might be ending as a Washington judge ruled in August that its $26 billion in payments to other firms to make the platform the default option on their devices was an anti competitive behavior that locked others out in the industry.
Following the ruling, there are rumors that the Justice Department might be considering breaking the company up by making it divest its mobile software and web browsing business divisions. However, any such decision will require court approval which will force the firm to comply. And while a court victory is great for news headlines, the US government has rarely broken up large companies in the modern era. The last such case was in 1982 through the breakup of the Bell System, and even if the browser and OS were made separate businesses, they are unlikely to survive on their own since both are provided to users for free.
Not to mention, the long drawn nature of anti-trust action could take years, and end up being enforced when the industry is vastly different from what it is now. This is because artificial intelligence is gnawing at the heels of the industry, with products such as OpenAI’s SearchGPT already in early stage releases. Speaking of AI, it’s also making its mark on the advertising industry. Just as advertisers are able to rely on millions of users’ data through search and social media platforms, AI helps them navigate through this data in novel and new ways.
As per McKinsey, marketing and sales could see a $931 billion productivity boost from AI through new features such as personalized campaigns and improved data use. These use cases have already become apparent, with the largest social media company in the world regularly sharing updates about how it is using AI to make advertisers’ jobs easier on its platform. Two tools that it offers are the Advantage+ and Advantage+ Shopping platform which enables advertisers and sellers to automate their campaign operations and determine the best advertisements to run. The platforms also appear to be driving results, with the firm quoting a study that is “demonstrating 22% higher return on ad spend for US advertisers after they adopted Advantage+ Shopping campaigns” with revenue for the firm through the two AI platforms doubling annually during Q1 2024.
Speaking of revenue, the advertising industry’s spending, which determines the fate of publishers is also determined by the state of the economy, consumer confidence, and advertisers’ outlook. One such firm with brands in more than 100 companies shared during its Q2 2024 earnings call that while the advertising market is not at its best right now, it does appear to be recovering. This recovery is taking place in areas such as food and technology which joins strong performance in healthcare, pharmaceuticals, and beauty care. Another publisher, which is one of the most well known digital media and lifestyle platforms in the world that relies on programmatic advertising (data driven user targeting through ads), saw its programmatic revenue grow by 3% annually during Q2 even as broader advertising revenue dropped by 19% annually.
With these details in mind let’s take a look at which advertising stocks to buy according to short sellers. For stocks that are driving advertising technology, you should check out 8 Best AdTech Stocks to Buy Now.
Our Methodology
To make our list of the best advertising stocks to buy according to short sellers, we listed the NASDAQ and NYSE listings of an advertising ETF by the percentage of shares outstanding that were sold short and selected the stocks with the lowest percentage. An added 23 stocks after an internet search were also analyzed, but all these had market caps below $300 million so they were excluded.
For these stocks, we also mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A customer service team in an office setting using the company’s Customer 360 platform to communicate with customers.
Salesforce, Inc. (NYSE:CRM)
Short Interest as % of Shares Outstanding: 1.41%
Number of Hedge Fund Investors In Q2 2024: 117
Salesforce, Inc. (NYSE:CRM) is another cloud computing company that allows businesses to manage their marketing campaigns across stores, web, social, and other platforms. With more than 70,000 employees and $35.7 billion in trailing twelve month revenue, Salesforce, Inc. (NYSE:CRM) is one of the biggest players in its industry. This means that unlike smaller SaaS and cloud companies, its story focuses more on customer retention and cost control as opposed to the growth based valuation for other firms. Its primary marketing platform is the Marketing Cloud, and Salesforce, Inc. (NYSE:CRM) plans to further improve this service through AI via its platform called Data Cloud. Data Cloud relies on more than 8 trillion records to streamline customer experience and provide Salesforce, Inc. (NYSE:CRM) with a unique leg up over competitors. However, despite its scale, a key weakness of the firm is its inability to land deals with large customers, and the stock could face headwinds on this front later on.
Salesforce, Inc. (NYSE:CRM)’s management shared details for its marketing features during the Q1 2025 earnings call:
“Let me give you just one example of a company that is using Salesforce across the entire front office. CrowdStrike, a leading cybersecurity company and a longtime customer of Salesforce added Data Cloud, Marketing Cloud, Commerce Cloud, Revenue Cloud and MuleSoft in the quarter. CrowdStike already relied on Einstein 1 sales and service and Slack, and now they’ll use Data Cloud to pull together new and trap data from data lakes to build a 360 degree view of their customers, helping them align sales and marketing efforts to drive growth. They’re also leveraging MuleSoft with incredible results. MuleSoft has helped CrowdStrike accelerate project delivery by 30% and decreased maintenance costs by 20%. Salesforce is now the backbone of CrowdStrike driving every aspect of CrowdStrike’s operation and limiting the reliance on complex siloed third party applications.”
Overall CRM ranks 8th on our list of the best advertising stocks to buy according to short sellers. While we acknowledge the potential of CRM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CRM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
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