Internet Advertising and Marketing Technology Updates Pre-4Q18 Earnings -- Pivotal Research Group

We are upgrading Alphabet Salesforcecom and Adobe each from Hold to BuyBy contrast a change in our approach to modelling Snap39s valuation leads us to negatively alter our price target and subsequently downgrade our recommendation on that stock from Buy to HoldOn a negatively revised price target for 2019 we maintain our Sell recommendation on Facebook as we think downside risks on higher costs and management changes are more pronounced now vs before and revenue growth also faces risks as marketers enhance their scrutiny when they assess their use of the platformWe are also maintaining our Hold recommendation on Twitter Sell recommendation on The Trade Desk and Buy recommendation on CriteoWe have separately initiated coverage on Amazon today which we rate Buy with a 1920 YE2019 price targetConcerns about an economic downturn are worth considering in looking at the sector although not explicitly incorporated into our models at this time which implicitly assume growth into the foreseeable future We think that marketing technology companies ADBE and CRM in particular would hold up best in a downturn given the predictable revenue streams and bookings made well in advance as well as secular trends supporting marketing tech which has a very long runway in our view Although AMZN39s AWS probably holds up well for similar reasons its retail business might face risks because of the relative maturity of ecommerce and likelihood that consumer spending trends would probably have a negative impact on the company vs the last recession As well overall digital advertising budgets would be cut in a recession Small businesses cut ad spending more significantly than large ones in the last downturn and if this occurred again in the same way it would disproportionately impact GOOGL and FB given their heightened exposures to SMBs To the extent that concerns around economic weakness in China play out or the current trade war with the US continues most of the companies we cover would not be directly impacted However we note that Facebook likely generated 57bn from Chinese advertisers on its platform whose spending trends might be impacted by economic trends in China or changes in postal regulations Amazon might also be negatively impacted to the degree that many of the companies using its marketplace and advertising products are also based thereAdditional commentary related to these stocks follows in this noteRISKS Core risks for digital advertising companies relate to 1 high degree of rivalry given an absence of barriers preventing new competition from emerging 2 overly high and increasing capital needs to remain competitive and 3 government regulations and consumer pushback related to management of consumer data and respect for privacyFULL REPORT INCLUDING RISKS AND DISCLOSURES CAN BE FOUND HERE Internet Advertising 1719pdfClick the social buttons above or below to share this story with your friends and colleaguesThe opinions and points of view expressed in this content are exclusively the views of the author andor subjects and do not necessarily represent the views of MediaVillagecomMyersBizNet Inc management or associated writers

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Internet Advertising and Marketing Technology Updates Pre-4Q18 Earnings -- Pivotal Research Group

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Brian Wieser

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Internet Advertising and Marketing Technology Updates Pre-4Q18 Earnings -- Pivotal Research Group

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