No two recessions are alike, the only things that they have in common are that they’re painful and that value destruction occurs. With a possible recession on the way, numerous investors are concerned that advertising revenues will take a hit as consumers will be looking to pare back spending.
Notably, Citi Group (NYSE: C) analyst Jason Bazinet agrees that persistent inflation could pack the same punch as a contraction of ad revenues in the U.S. media sector.
“If there is a recession in late 2022 or 2023, we believe many firms could still see a recession that looks like 1974 or 1980 (but unlike 2008 or 2020). The market, however, seems to have placed similar weighting on top-line pressures and cost pressures. We disagree with this view.”
Picks for you
In particular, Bazinet pointed to two stocks with solid margins and high exposure to ad revenues that are oversold at the moment, which could potentially represent a buying opportunity for investors.
Endeavor Group Holdings (NYSE: EDR)
Endeavor Group is a global sports and entertainment company that focuses on media production and distribution, brand licensing, and experiential marketing. Their latest earnings release showed revenues of $1.47 billion, an increase of 37.4% year-on-year (YoY), beating expectations by $140 million.
Similarly, earnings per share (EPS) were $1.16, representing a beat of $0.78 and earnings price upgrades from numerous investment firms. On the other hand, year-to-date (YTD), the stock is down over 37%, while in the last session, the stock gained over 3% and closed above the 20-day and 50-day Simple Moving Averages (SMAs).
Analysts on Wall Street rate the shares a strong buy, predicting that in the next 12 months, the average price the stock could reach is $34.09, 55.88% higher than the current trading price of $21.87.
Lamar Advertising (NASDAQ: LAMR)
Lamar is a peculiar advertising play as it basically represents a Real Estate Investment Fund (REIT) for advertising since it owns digital billboards and signage. Its Q1 earnings showed $451.4 million in revenue, a YoY increase of 21.7%, beating the estimates by $24.19 million.
Further, the total EPS was $0.91, beating estimates by $0.18, while the stock lost over 24% YTD. During the last trading session, the shares jumped over 3% to cross and close above the 20-day SMA, holding the trading range between $83 and $93.
Moreover, analysts rate the shares a moderate buy, with the next 12 months’ average price prediction at $105.5, 15.02% higher than the current trading price of $91.72.
Finally, the two above stocks could tick the boxes of businesses with cash flows coming in at predictable rates, that have the necessities to survive a prolonged recession.
With both firms down big for the year, a possible buying opportunity has opened up for investors seeking exposure to the advertising business.
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Disclaimer: The content on this site should not be considered investment advice. Investing is speculative. When investing, your capital is at risk.
