These 2 ad stocks are best positioned into Q4 says BMO

Investing.com -- BMO Capital analysts believe Google (NASDAQ:GOOGL) and Meta Platforms (NASDAQ:META) are the top ad stocks heading into the fourth quarter of 2024 and 2025, citing their scale and advanced AI tools as key drivers. 

According to BMO’s recent checks with advertising industry experts, discussing key trends and observations across the US, UK, and Canadian advertising ecosystems, both companies are well-positioned to capture additional ad spend as their AI tools help advertisers optimize campaigns more effectively.

“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.

The experts are also said to have highlighted that Google’s Performance Max (PMax) is driving incremental ad dollars toward search ads, thanks to AI-driven improvements in return on ad spend (ROAS). 

However, YouTube has seen some headwinds due to competition from sports engagement for July in events like Copa America and UEFA European Cup. Despite these challenges, Google is still seen as a strong player in the digital ad space.

BMO said Meta is expected to see revenue growth in the 10%-12% range for Q4 2024, with some experts predicting the lower end of this guidance due to a slowdown compared to the first half of the year. 

However, they explained that Meta is poised to benefit from increasing retail and social commerce, with in-app shopping ads generating higher CPMs. 

BMO’s experts foresee social commerce becoming a significant growth driver for Meta, with transaction-related ads expected to grow from 8.2% to over 40% of total spend over time.

Connected TV (CTV) is also anticipated to play an important role in advertising growth, with Amazon (NASDAQ:AMZN) Prime Video and Netflix (NASDAQ:NFLX) identified as the best-positioned platforms. 

They note that Amazon’s Prime Video has shifted from experimental ad spending to committed budgets, while Netflix’s CPMs have fallen from $40 to $23, making it more attractive to advertisers.