Goldman Sachs adjusts ratings on digital advertisers ahead of earnings

Investing.com -- Goldman Sachs (NYSE:GS) has adjusted its ratings on several digital advertising companies ahead of the Q3 2024 earnings season.

In a recent note, the firm highlights that Q3 digital ad trends remained robust, with notable strength in areas like digital video and retail media networks. However, challenges such as tougher year-over-year (YoY) comparisons and evolving ad pricing dynamics are influencing performance across the sector.

“Certain platforms/channels are beginning to face tougher YoY comps in terms of ad impression growth, particularly in short-form video,” Goldman analysts said.

Meanwhile, ad pricing trends remain strong overall, especially for Meta Platforms (NASDAQ:META). Analysts believe this could boost ad revenue growth momentum for the social media giant in the second half of 2024. However, they also note growing interest among advertisers “in widening out their budget allocation to mid-sized and emerging platforms in search of relatively more attractive Return On Advertising Spend (ROAS).”

As for the rating changes, Goldman upgraded Ibotta to Buy from Neutral, citing an “attractive risk/reward as we view current valuation levels as under-appreciating IBTA’s forward growth opportunity around scaling 3P redemptions partnerships.”

On the other hand, Yelp (NYSE:YELP) was downgraded from Buy to Neutral amid expectations that continued headwinds within its core RR&O segment will continue to outweigh growth within its Services unit.

Goldman Sachs reiterated a Buy rating on key industry players such as Meta, Alphabet (NASDAQ:GOOGL), Pinterest (NYSE:PINS), DoubleVerify (NYSE:DV), Opera (NASDAQ:OPRA), and Mediaalpha Inc (NYSE:MAX), with Meta and Alphabet being viewed as particularly strong due to their AI integration efforts.

For Meta, the Wall Street firm raised its price target to $636 from $555, expecting continued topline growth driven by AI-related opportunities and the ramp-up of Reels monetization.

Meanwhile, Pinterest is also projected to see strong returns, with its price target set at $46, backed by the platform’s expanding global user base and the continued adoption of AI in its ad products.