The power of data is unlocking infinite possibilities in our world.
One of the most promising possibilities is in advertising, where businesses are leveraging data and artificial intelligence to automate, accelerate, and optimize ad campaigns.
Ever notice how you search for running shorts on Google, and then the next time you open Facebook, your feed is full of ads for running shorts?
That’s data-driven advertising at work – marketers and publishers alike are using data analytics and AI technology to put the right ads, in front of the right people, at the right time.
Make no mistake. Data-driven advertising produces optimal results. For the consumer (they get relevant ads). For the brand (their product gets in front of likely buyers). And for the publisher (they boost the value of their ad inventory).
Data-driven advertising, consequently, is the future of advertising.
That’s why, according to Zenith, global data-driven ad spend has increased by 3,125% since 2012 – a jaw-dropping rise which has sparked huge gains in data-driven advertising stocks like The Trade Desk (NASDAQ:TTD), which has surged almost 5,000% since its 2016 IPO.
But the data-driven advertising megatrend won’t stop until it has taken over all of advertising… and at $126.5 billion in 2020, data-driven ad spending accounts for just ~20% of total ad spending today.
The implication?
The data-driven ad megatrend will remain in hypergrowth mode for a lot longer… and more colossal winners like The Trade Desk stock will emerge.
Today, we will tell you about a small data-driven ad tech stock that is in the midst of an explosive turnaround. This turnaround, if successful, could ultimately end with the company turning into the next Trade Desk and the stock soaring 20X.
The Best Turnaround Story in the Booming Data-Driven Advertising Market
For a better part of the past decade, a French ad tech company by the name of Criteo (NASDAQ:CRTO) was at the forefront of the data-driven advertising revolution.
The company created a proprietary and robust “Shopper Graph” – which essentially comprised a web of publisher and marketer data on hundreds of millions of online shoppers, their online behavior, and their buying intentions – to which it applied market-leading AI tools to programmatically optimize digital ad campaigns.
Criteo catered this novel programmatic ad engine to the online retail world. For a time, Criteo’s platform was a must-have ad tech product for anyone who wanted to sell or advertise any product online.
From 2012 to 2017, Criteo’s revenues rose by more than 45% per year.
Then the Cookie Crisis hit…
My longtime readers know about the Cookie Crisis. The traditional way publishers and marketers have collected consumer data – through third-party “cookies” – is being phased out of the industry due to data privacy and control concerns.
Without this consumer data, data-driven advertising does not work. Without this consumer data, Criteo’s Shopper Graph loses relevance, and its whole business model loses value.
This existential threat has caused Criteo’s growth trajectory to fall flat on its face. What was once a near 50% annualized revenue growth company, is now on track for back-to-back years of falling revenues.
But… as longtime readers also know… the data-driven advertising industry is finding ways to fix the Cookie Crisis.
For example, ad tech companies like LiveRamp (NYSE:RAMP) and The Trade Desk are coming up with opt-in, 100% transparent and secure ways to gather and track online consumer data in a post-cookie world.
Criteo is working intimately with these companies to not just secure access to this data, but also play a pivotal role in constructing the data. The company has specifically partnered with both The Trade Desk and LiveRamp to help build-out this new open-source, unified online ID database.
Construction of this database will make the Cookie Crisis obsolete.
With the Cookie Crisis obsolete, Criteo’s Shopper Graph will regain robust relevance – and its AI-powered ad tech tools will regain value.
Customer growth will rebound. Average spend per customer will rise.
Criteo will jump back into hypergrowth mode.
That has huge implications for Criteo stock.
Because of Cookie Crisis headwinds, Wall Street analysts see the company’s revenues essentially going nowhere over the next few years. Criteo stock is valued accordingly, sporting a measly $1.2 billion valuation on almost $200 million in adjusted profits last year.
But… if Criteo fixes its Cookie Crisis… the company will easily sustain double-digit revenue growth over the next few years… and that $200 million in adjusted profits last year will keep rising, ultimately making the company’s $1.2 billion valuation look like an absolute steal.
Indeed, my modeling says that under realistic growth assumptions, Criteo could net about $1 billion in net profits by the end of the decade – on which a 20X multiple implies a potential future valuation here of $20 BILLION.
That represents 20X upside in this stock over the next decade… which is easily enough upside to land Criteo stock on your buy radar today.
On the date of publication, Luke Lango did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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