Adweek recently published sponsored content on digital tracking and cookies. If you follow tech stocks and the advertising business, there aren’t many other topics that garner so much interest.
Written by Epsilon VP of Product Management Tyler McDaniel, the headline said it all: If You Want to Future-Proof Your Brand, You Gotta Drop the Cookie.
Epsilon, if you’re unfamiliar, is a marketing and advertising solutions provider. It helps brands use data and technology to get closer to their customers. It’s owned by Paris-based Publicis Groupe (OTCMKTS:PUBGY), an advertising and public relations conglomerate.
Essentially, McDaniel lays out the reasons why first-party data is so much better than third-party cookies.
“Marketers will continue to struggle against third-party identifier deprecation as the digital world changes. But first-party data strategies will allow brands to take back the power of their marketing and use data as a tool to better connect with consumers,” McDaniel wrote.
Who are the digital tracking tech stocks to buy to ride the move to first-party data? Here are three possibilities.
HubSpot (HUBS)
HubSpot (NYSE:HUBS) stock is not cheap. It trades at 57x cash flow. However, relative to its five-year average of 117x cash flow, it’s fair value, historically speaking.
As the company’s investor relations site states, its software and services are meant to help its customers — over 217,000 in more than 135 countries — attract and retain more customers. That’s exactly what martech is.
The company is focused on helping SMBs (small and medium-sized businesses) connect all the technology required to successfully grow a business. It started in 2006 with a marketing hub that combined traditional inbound marketing with digital marketing tools to attract new customers.
Over the next 18 years it added a number of different products, or hubs, ultimately creating a smart CRM (customer relationship management) platform that unifies all of its various products in one place.
It estimates that its TAM (total addressable market) will grow to $77 billion by 2028 from $51 billion in 2023. It has captured less than 10% of this TAM. It will use AI to grow its share of this significant market.
It’s come a long way. In Q1 2017, it had revenue of $82 million. In Q1 2024, it was $617 million. It grew revenue 23% year-over-year in the first quarter by growing its customer base by 22%.
Applovin (APP)
Applovin (NASDAQ:APP) stock is up nearly 100% in 2024. That’s the good news. The bad news is that it traded above $110 in 2021, about 42% higher than where it currently trades.
Based in Silicon Valley, the company’s software platform uses AI-powered solutions to help its customers “reach, monetize and grow their global audience.”
It has two operating segments: Software Platform (64% of revenue) and Apps (36%). In Q1 2024, the former’s revenue grew 91% to $678 million while the latter’s revenue was up 5% to $380 million. Overall, its adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $549 million, 101% higher YOY, with a healthy 52% EBITDA margin.
For 2024, it expects revenue of $1.07 billion at the midpoint of its guidance, $560 million adjusted EBITDA, and an adjusted EBITDA margin of 52.5%.
Much of the company’s growth has to do with AXON, the company’s AI-powered advertising engine, which matches advertiser demand with publisher supply through hyperfast online auctions. It is martech at its finest.
Sixteen out of the 23 analysts that cover its stock rate it a Buy with a target price of $99, well above where it’s currently trading.
SPS Commerce (SPSC)
While it might not be martech in the traditional sense, SPS Commerce’s (NASDAQ:SPSC) cloud-based supply chain solutions enable more than 120,000 retail supply chain partners to communicate across the various channels that make for successful omnichannel retail.
Getting and keeping customers is what martech is about. SPS Commerce’s cloud-based smart CRM platform, combined with its various Hubs, is absolutely focused on the same thing.
Although SPSC stock has underperformed the S&P 500 by 227 basis points in 2024, its five-year return of 262% smokes the index. I don’t see why it can’t outperform over the next five years.
The company reported Q2 2024 results July 25 after the markets closed. Its earnings per share were 80 cents, three cents higher than Wall Street’s estimate. On the top line, it generated $153.6 million in revenue, about $1.7 million higher than the consensus.
For 2024, it is forecasting EPS of at least $3.63, 30 cents higher than analyst expectations, with $625 million revenue at the midpoint of its guidance, $1.2 million higher.
In its Q2 2024 press release, the company said the quarter is the 94th consecutive quarter of growth. It doesn’t get much better.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.