Advertising Software Stocks Q3 Results: Benchmarking LiveRamp (NYSE: RAMP)

Executive Summary

The advertising software industry continues to flourish, propelled by the escalating demand for data-driven advertising solutions. In Q3 of 2024, the six advertising software stocks tracked by our firm reported impressive financial results, surpassing analyst consensus estimates by an average of 5.2% in terms of revenue. However, guidance for the ensuing quarter generally aligned with consensus expectations. Despite facing headwinds due to investors prioritizing immediate cash flows, advertising software stocks outperformed the broader market, exhibiting an average share price appreciation of 22% since their preceding earnings disclosures.

Company Analysis

LiveRamp (NYSE: RAMP)

LiveRamp, a prominent software-as-a-service (SaaS) provider, empowers companies to optimize their marketing efforts by harmonizing offline and online customer data. In Q3, LiveRamp reported revenues of $159.9 million, marking an 8.7% year-over-year surge and exceeding analyst expectations by 4.9%. The company witnessed a notable improvement in its gross margin, although customer growth decelerated. LiveRamp also achieved the most substantial full-year guidance adjustment among its peers and expanded its clientele by adding three enterprise customers contributing over $1 million annually, bringing the total to 99. Since the earnings announcement, LiveRamp’s stock has surged by an impressive 36.6% and is currently valued at $40.93.

AppLovin (NASDAQ: APP)

Co-founded by the visionary Adam Foroughi, AppLovin is a multifaceted entity encompassing a mobile game studio and a provider of marketing and monetization tools for mobile app developers. In Q3, the company reported revenues of $864.3 million, representing a robust 21.2% year-over-year increase and surpassing analyst expectations by a significant 8.5%. AppLovin delivered an exceptional quarter, characterized by a substantial improvement in gross margin and a remarkable beat of analysts’ revenue estimates. The company achieved the most significant analyst estimates beat among its peers. AppLovin’s stock has gained a commendable 13.3% since the results and is currently trading at $45.51.

The Trade Desk (NASDAQ: TTD)

Founded by former Microsoft engineers, The Trade Desk offers cloud-based software that leverages data to empower advertisers in meticulously planning, placing, and targeting their online ads. In Q3, the company reported revenues of $493.3 million, reflecting a solid 24.9% year-over-year increase and surpassing analyst expectations by a modest 1.2%. However, The Trade Desk’s revenue guidance for the next quarter fell short of expectations, resulting in the weakest performance against analyst estimates among its peers. The company’s stock has experienced a decline of 7.7% since the results and is currently trading at $71.

PubMatic (NASDAQ: PUBM)

PubMatic stands out as a fully integrated cloud-based programmatic advertising platform. In Q3, the company reported revenues of $63.68 million, representing a modest 1.3% year-over-year decrease but exceeding analyst expectations by a significant 7.1%. PubMatic delivered a strong quarter, bolstered by optimistic revenue guidance for the next quarter and a solid beat of analysts’ revenue estimates. Despite exhibiting the slowest revenue growth among its peers, PubMatic’s stock has climbed by an impressive 22.1% since the results and is currently valued at $14.78.

DoubleVerify (NYSE: DV)

DoubleVerify provides advertising solutions to businesses, encompassing ad verification, fraud prevention, and brand safety. In Q3, the company reported revenues of $144 million, reflecting a substantial 28.3% year-over-year increase and exceeding analyst expectations by a notable 3.6%. DoubleVerify delivered a commendable beat of analysts’ revenue estimates, but its full-year guidance update was the weakest among its peers. The company’s stock has witnessed a surge of 38.5% since the results and is currently valued at $40.12.

Conclusion

The advertising software industry continues to demonstrate resilience and immense growth potential. While companies face challenges stemming from investor sentiment and near-term cash flows, the demand for data-driven advertising solutions remains robust. Investors are advised to meticulously evaluate each company’s financial performance, growth prospects, and competitive positioning to identify attractive investment opportunities in this dynamic sector.