The global advertising business will continue its shift online in 2020, and Bank of America named Facebook, Inc. FB and Twitter Inc TWTR as the two best stock plays in digital media.
Bank of America analyst Justin Post forecasts 15% growth in digital advertising revenue in 2020 and said Monday online advertisers will be fighting for their share of an estimated $341 billion in global advertising spend next year.
Trends To Watch
Post named five top themes in online advertising he is monitoring in 2020:
- A shift toward video formats.
- Increasing monetization.
- Integration of advertising and e-commerce.
- Big events (2020 U.S. election, Olympics).
- Regulatory headwinds.
Facebook and Alphabet, Inc. GOOG are the two dominant share leaders in online advertising, but Post named Facebook his top overall stock pick for 2020.
“While stock outperformed the S&P and Alphabet in 2019, we prefer Facebook for more potential estimate upside on 'green shoots' monetization initiatives, higher ’20 event exposure, potential that messaging value not reflected in stock price, and more attractive ’20 excash P/E at 20x vs GOOG at 22x despite higher growth (21% for FB in 2020 or 1x P/E/G),” Post wrote in a note.
In the small- and medium-cap space, Post said Twitter is his top pick given improving sentiment, stronger user growth trends, a MAP product relaunch and positive average revenue per user growth trends in the second half of the year.
Bank of America has Buy ratings for both Facebook and Twitter and price targets of $240 and $39, respectively.
Benzinga’s Take
Facebook is likely the safer bet of the two social media stocks given its consistent track record of strong results. If Twitter delivers solid numbers in the next couple of quarters and begins to build market confidence, it could easily have the most potential upside of the two.
Do you agree with this take? Email feedback@benzinga.com with your thoughts.
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